Martin's Mailbox: Green shoots and withered grapes

Martin's Mailbox: Green shoots and withered grapes


Reasons to be cheerful: gross mortgage lending was up 14 per cent in October compared with the previous month, and nearly five per cent year-on-year; first-time buyer numbers in London and Scotland are at a three-year high; secured lending volumes have exceeded 2011 levels; bridging continues to power ahead; and… France was stripped of its ‘AAA’ credit rating by Moody’s. 

Plenty of theories are being expounded to explain this sudden burst of good news, but I particularly like the Gallic claim that their demotion from the economic premier league is all an Anglo-Saxon conspiracy - perfidious Albion and all that. But let’s not be too smug as Boy George (Osborne) could be facing his own downgrade nightmare if the good news doesn’t spread soon to the wider British economy.

It seems a long time ago now but it’s less than three years since the Chancellor spoke confidently of paying down the National Debt while bringing the deficit under control. Neither has happened. Instead, George has found something of a niche in explaining away economic growth downgrades and increases in borrowing.

Look at the figures. The UK’s indebtedness to the rest of the world and its institutions has risen by £300 billion since the last election and is forecast to rise a further £400 billion by the next General Election in 2015. The deficit (the annual difference between government income and expenditure) is heading towards £130 billion in 2012 compared with ‘just’ £120 billion in 2011. Meanwhile, the economy is struggling to pull itself convincingly clear of recession.

Just yesterday, the respected Institute for Fiscal Studies (IFS) predicted the government will need to find an extra £11 billion in tax rises or spending cuts if steady and sustainable growth doesn’t take off soon. “Not more cuts…!?” I hear the Guardian readers scream. But is this really a cutting government, or does it suit its agenda to be thought of as such?

Again, look at the facts. While capital spending on infrastructure projects has been slashed - with an attendant dramatic and damaging fall in construction activity - current account spending on the day-to-day costs borne by government has increased markedly. The biggest culprit, as usual, is welfare. 

At a time when the majority of modestly-remunerated wealth creators in the private sector have taken a kicking, spending on welfare benefits actually increased in October by 7.7 per cent. Since taking office, this ‘brutal’ government has been responsible for a rise... that’s right, a rise… in welfare costs of 15 per cent. With the total benefits budget now standing at £200 billion - or 14 per cent of GDP - how much longer can we go without dramatic and long overdue reform? 

The macro-economic effect inevitably feeds through to the micro economy and its commercial silos. That’s why I’m not (yet) hailing the end of doom-and-gloom. I’m genuinely concerned we lack the political will, talent and ability to quickly drag us out of our home-grown economic problems, much less those from abroad over which we have little control. For my money therefore, the green shoots will have to wait a little longer.

As for my ‘withered grapes’ in the title to this piece, I point an accusatory finger at the NACFB. Attending the trade association’s Gala Dinner last Friday, I experienced something I thought near-impossible: two virtually undrinkable wines from Italy served with dinner. Good grief, this is Italy we’re talking about; not the New World with its beauty parade of swaggering young upstarts intent on toppling the supremacy of the Old. As my colleague Bob Sturges wryly observed, “Italy doesn’t ‘do’ bad wine”. To find a white and a red that were just that takes some doing. Congratulations, the Park Plaza Westminster (an otherwise stunning hotel in a terrific location).

Sour grapes aside (groan…), my heartfelt congratulations to Adam Tyler and the whole team at the NACFB on reaching its 20th anniversary. As I’ve said before (more groans…), our industry is a better one for the presence of well-run and effective trade bodies. The NACFB has much to commend it, and we at Omni Capital look forward to playing our full and active part as a lender patron.


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    Add to that £16 for a double scotch and a bottle of Becks at the bar. I think the prices in my mini bar were cheaper! Great night though, thanks Adam. One last thing, less smut please with the entertainment. Most of us are a little more refined these days. It was a bit like the wheel tappers and shunters social club! Can't win with us moaners can you!

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    Simon Allen

    Hi Martin Wine is down to personal choice just like lenders.I quite enjoyed the red as it wasn't too heavy.But don't get me on the subject of the beef. That must have been one unhappy cow.

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