IoD Blogs - Miles Templeman

Chancellor in hot water again

The Chancellor got into trouble again at the TUC conference. Warning that higher pay awards would lead to a further deterioration in inflation, the Chancellor urged restraint. Whilst the Chancellor’s general point was OK, the issue is more nuanced than appears at first sight. If pay awards went up by 5 per cent and productivity rose by the same amount, there would be no increase in unit labour costs. What matters is the impact on unit labour costs.

Cold war and a hot economy?

I was in Russia just as the crisis in Georgia began to dominate the headlines. With all the talk of a new cold war I began to wonder whether we were about to go back to the future. That’s when you notice the difference. I can remember Moscow prior to the collapse of communism. Even in the late 1980s the Gum department store in Red Square looked like a 1950s jumble sale. Now it’s all changed. Moscow looks like a western city. But let’s not get too carried away about the contrast between a cold war and hot economy. The TNK-BP wrangle and events in Georgia show that the rule of law is still a slippery concept. The economy is unlikely to stay hot if foreign investors can’t be assured of property rights. Russia isn’t Zimbabwe but the same principle applies.

Political or economic stimulus?

The announcement of special measures to help the housing market probably won’t do much harm but they won’t do a lot of good either. The Government simply doesn’t have the money to provide a much more generous fiscal injection. The Government should have spent less in the good years in order to have enough available to stimulate the economy in the bad years. Unfortunately they implemented the exact opposite approach.