Conservative Home are today setting out “ten good reasons why we can support the Conservatives with enthusiasm.” Top of the list is George Osborne, prompting Labour List editor, Alex Smith, to tweet, “Wow, April 1st already.” But the justification – lowering corporation tax – is not something to laugh at.

Tim Montgomerie writes:

“George Osborne will use his first budget to cut the headline rates of corporation tax by abolishing allowances. As part of his ambition to make Britain an international headquarters for business and to “improve Britain’s international rankings for tax competitiveness and business regulation” he wants to continue to cut corporation tax in budget-after-budget. Tory Treasurer Michael Spencer has spoken of a corporation tax rate of 20% by the end of a first Parliament.”

The ‘Tax ready reckoner and tax reliefs‘ guide (Table 5) which accompanies the pre-Budget report sets out that the proposed 3 pence cut in corporation tax and 2 pence cut in the small companies rate would cost £3.2 billion in 2011-12 and £3.7 billion in 2012-13. To pay for it, Osborne proposes (p. 8-9) abolishing the £50,000 annual investment allowance; reducing general plant and machinery capital allowances to 12.5 per cent; and reducing long life plant and machinery capital allowances to 6 per cent. With business investment continuing to fall off a cliff, it is not surprising that the manufacturers’ lobby group, EEF, say:

“the importance of capital allowances cannot be underestimated.”

Cutting corporation tax by a further 5 per cent, as Spicer suggest, would cost an additional £4.3 billion on cautious estimates (i.e. if the projected 2012-13 loss was the same in subsequent years). As Left Foot Forward has shown, Spicer’s company would benefit to the tune of £22.5 million. Spicer did not set out which public services he would propose cutting to pay for this ambition.

George Osborne may be a joke but his policies, sadly, are not.

Yesterday’s ComRes poll for The Independent, criticised by UK Polling Report, Political Betting and Iain Dale for a flawed model of quesitoning on David Cameron’s economic policies, does, nonetheless, contain some worrying findings for the Conservatives.

The headline figure shows the Tory lead down slightly, from nine to seven points, with their support unhchanged at 38 per cent, Labour up two to 31 per cent and the Liberal Democrats stuck at 19 per cent. The underlying data, however, reveals even more good news for the Government.

When asked what they think of themselves as, more people identified as Labour than Conservative by 28% to 24%, with the Liberal Democrats on 14%. When those who fail to express a preference are stripped out (22% of the sample), Labour’s lead over the Tories increaes to 37%:31%.

Aside from the question about whether David Cameron should be clearer about what he would do about the economy (82% agreed he should), 37% agreed that the Government can take credit for getting Britain out of recession, 69% disagreed that the recession would have ended sooner if the Conservatives had been in power and only 52% disgreed that they could trust Gordon Brown more than the Tory leader to help Britain’s economy to recover.

Someone must really want to hurt figure-of-fun, “Boy” George Osborne. As these images from the BBC show, within a minute of announcing that Lord Stern would advise the Conservatives, the man in question had issued a statement denying his involvement.

The full story is reported in the Evening Standard and on Sky. George Osborne announced he was “delighted that Lord Stern has agreed to advise us on the creation of this Green Investment Bank”. Only for Lord Stern to say later:

“I should stress that I am not, and have no plans to be, an adviser to any political party.

“Climate change and the transition to a low-carbon economy should be high on the agenda for every political party, not just to reduce the risks that result from greenhouse gas emissions but also to stimulate an exciting period of growth, creativity and innovation.

“I would be willing to speak to the Conservatives’ advisory group about their ideas for a Green Investment Bank, just as I am continuing to contribute to discussions with the Labour Government about policies on climate change.”

Lord Stern was second permanent secretary at the Treasury while Gordon Brown was Chancellor from 2003 until his retirement in 2007.

UPDATE 17.11

Liberal Conspiracy also have the story.

While deputising for David Cameron during PMQ’s last week, William Hague adopted the role of chief Tory inquisitor and criticised Labour for pushing the idea of a global financial transaction tax, also known as a ‘Tobin Tax’. In doing so, he misrepresented economic opinion and the views of other countries.

Hague claimed “the Prime Minister’s Tobin tax on transactions”:

“has been rejected throughout the world and was ridiculed yesterday by the Governor of the Bank of England?…

“The Governor of the Bank of England said that President Obama’s proposal is much more serious than the Prime Minister’s Tobin tax. In fact, the Governor said that he could not think of anyone internationally who was enthusiastic about the Prime Minister’s idea.”

This was a remarkable statement to make as both France and Germany, along with the President of the European Commission have expressed strong backing for the Tobin Tax. In December, the 27 heads of the EU in their joint communique, expressed early support for the tax and called on the IMF to assess and study the proposal:

“The European Council encourages the IMF to consider the full range of options including insurance fees, resolution funds, contingent capital arrangements and a global financial transaction levy in its review.”

Mr Hague further claimed that “President Obama’s proposal is much more serious than the Prime Minister’s Tobin tax”. This despite 200 leading economists in the US signing an open letter in December 2009, arguing that financial speculation in the computerised world has led “to an enormous explosion in trading volume, with most trades having little economic or social value and redistributing disproportionate resources to the financial sector.” They call for the introduction of “modest” global financial transaction taxes.

Closer to home, the head of the UK Financial Services Authority has expressed support for the proposed idea, decrying some trading activities in the financial world as “socially useless”, that needed to be curbed with global transaction levies. Though not universal, there is a welter of support internationally for the Tobin Tax. The Conservatives should take stock when next crafting their economic rebukes against the Government.

A majority of the world’s nations yesterday signed up to the Copenhagen Accord and filed plans for emissions reductions, scraping over the UN deadline of January 31st for doing so. The pledged actions, however, fall far short of action needed to prevent global temperatures rising by 2 degrees C – the target adopted in the text of the Accord itself.

Instead, existing actions set the world on course for a 3.5 degrees Celsius temperature rise, according to earlier analysis of pledges carried out by consultancy firm Ecofys.

PriceWaterhouseCoopers calculate that on current projections the world will burn up its allocated carbon budget for the first half of the century by 2034 – 16 years ahead of schedule.

There had been concerns in the weeks running up to the deadline that countries would not even submit pledges – a concern heightened when Yvo de Boer, Chairman of the United Nations Framework Convention on Climate Change (UNFCCC), played down its significance, saying:

“It’s a soft deadline, there’s nothing deadly about it.”

Chinese and Indian officials had been briefing that their two nations might not sign up to the Accord, despite playing key roles in its creation. New Zealand wobbled about its commitment, only signing up at the very last moment.

Whilst most countries restated the emissions pledges they had made in the run-up to the Copenhagen talks, Canada took the opportunity to decrease its targets. In a staggering sleight of hand, Canada’s Environment Minister, Jim Prentice, said that he wished to “continentalise” his country’s emissions-reduction plan by harmonising actions with those of the United States.

This means that Canada’s 2020 target drops from a 20 per cent cut on 2006 levels to a 17 per cent cut on 2005 levels. Using the 1990 baseline adopted by most countries, this actually allows for a 2.5 per cent increase in Canada’s emissions.

Most of the numbers submitted were expressed as ranges, subject to being ratcheted up or down depending on other countries’ commitments. Developing countries are not obliged to make absolute emissions reductions under the Accord, but instead are encouraged to set out plans for slowing emissions growth.

Of these, China’s are the most ambitious, offering a 40 to 45 per cent cut in carbon intensity per unit of GDP by 2020.

The most ambitious commitments came, ironically, from the world’s smallest and most vulnerable countries. The Maldives, which is set to be one of the first island-states to be submerged by rising sea levels, pledged to become carbon neutral by 2020 – a 100 per cent cut in net carbon emissions.

Latin American state Costa Rica pledged to match this target by 2021. The low-lying Marshall Islands also pledged a 40 per cent cut by 2020.

A handful of countries have rejected the Copenhagen Accord and refused outright to sign up – including Cuba, Venezuela, Bolivia, and Sudan – nations which had also blocked the UN from adopting the Accord as a formal plan during the closing sessions of the Copenhagen talks.

A UN summary of signatory nations will be published soon.

The Conservative party’s economy policy would “strangle the recovery at birth” with cuts equivalent to taking £5 billion out of the economy, according to the Labour party.

At a press conference this morning, Peter Mandelson, Yvette Cooper and Liam Byrne outlined how David Cameron’s plans to “start” cutting spending in 2010 would effectively remove £11.2 billion from the economy. Liam Byrne said that Treasury models showed that the cut would be equivalent to cutting GDP by £5 billion or one third of a per cent.

The Labour party outlined in the pre-Budget report that it would increase public spending in 2010-11 by £31 billion. The Conservative party has indicated that they would start spending cuts on day one. Last month, George Osborne said:

“Total spending is planned to go up by £31 billion in nominal terms, or by more than 2 per cent in real terms. During a period when the Treasury expects the economy to be growing by at least 2 per cent, and with the largest budget deficit of any developed economy, that is simply not credible.”

The Labour party’s document ‘Conservative party risk to recovery‘ outlines that:

“If the Conservatives were to allow the increase in Annually Managed Expenditure [including debt interest and unemployment benefits] to go ahead, as David Cameron indicates, they would only be left with the option of reducing Resource Departmental Exependiture Limits. It is this area that David Cameron said should see “some reductions” next year…

“If the Conservatives restricted their cuts to just this additional planned spending, they would take £11.2bn out of the economy.

“If they actually wanted to cut departmental spending, as they often claim, they would need to go beyond £11.2bn.”

Climategate was a well coordinated, strategic and devastating attack on the Copenhagen climate talks in December last year. With unprecedented moves from US and China in the run-up, the world’s media and attention was hooked onto the alleged manipulation of data at the University of East Anglia. That stolen information framed the entire negotiations, and set it up for failure.

Today the prospect of a clean-energy economy faces a new threat.

Osama bin Laden has called for the world to boycott American goods and the US dollar, blaming the United States for climate change, according to a new audiotape released last week. Right-wing media outlets including The Daily Telegraph, Drudge and Fox News, are already seizing on the al-Qaeda leader’s comments.

All this came on the same day the American administration formally announced its 2020 carbon targets, and a 39 per cent increase in wind-power.

Those in the struggle for a clean-energy economy and safe climate futur, should ask themselves why bin Laden would come out with this statement. This is the man who has shown no concern for human life, indeed revels in killing innocent people – why does he now care about rising sea-levels?

His plan is to drive the wedge between the climate cynics and climate activists even further, and it’s already working. This is the perfect story to kill any federal climate bill in the US. In fact it’s the perfect strategy if you desire chaos and destruction.

Any association with him immediately demonises the climate movement, and will maintain the stranglehold of oil-rich nations over the American economy. More worryingly in the long term, a world in the throws of extreme weather and an unpredictable food-supply is rich pickings for a fanatic totalitarian.

So how should the environmental movement respond?

• Immediately and unequivocally condemn his comments. We can’t let ourselves be aligned with a terrorist. Bin Laden isn’t an environmentalist and cares nothing about climate change (because that would mean caring about people).

• Whatever your feelings on climate change; don’t use his comments for your cause, because actually he will be using you.

The UK economy limped out of recession in the final quarter of 2009, with official figures showing that real GDP increased by a meagre 0.1 per cent.

Although details are sparse, the official statisticians noted the relative strength of motor trades and retail, suggesting that growth was boosted by consumer spending ahead of January’s increase in VAT from 15 to 17.5 per cent and by the car scrappage scheme, which is also due to end soon.

There are two messages to take from the fact that growth was so low despite the stimulus from a lower VAT rate and the car scrappage scheme – and from the ultra-low interest rates and quantitative easing measures put in place by the Bank of England.

First, the UK economy’s reliance for growth on the financial sector in the years leading up to the financial collapse and recession clearly left it more vulnerable than other large economies when the crisis hit.

Second, it would be risky in the extreme to start to remove the monetary and fiscal stimulus being given to the economy at anything other than a very gradual pace.

This means that the Monetary Policy Committee should not be attaching great weight to the latest consumer price figures, which show inflation in December was 2.9 per cent – almost at the top of its target range (it is very likely to breach that range in January).

This is largely the result of external factors – the exchange rate and the oil prices. Domestic inflation pressures, which are what the MPC can hope to control, remain muted.

1. Official figures show the UK economy has emerged from recession.

Real GDP increased by just 0.1 per cent in the final quarter of 2009 but this was enough to lift the economy out of recession, following six consecutive quarters of contraction. The increase disappointed economists, who were widely forecasting growth of 0.3 or 0.4 per cent (though this is only a provisional estimate and growth could be revised higher).

There is evidence that, without a boost from extra spending ahead of the return of the main rate of VAT to 17.5 per cent in January and as a result of the car scrappage scheme, the economy would not have shown any growth.

2. Households are borrowing less and saving a lot more.

Statistically, the recession is the result, in large part, of a major shift in the behaviour of households. People are borrowing less and saving more. As a result, the household saving rate has increased from -0.7 per cent in the first quarter of 2008 to +8.6 per cent in the third quarter of 2009.

If the saving rate had not increased over this period, economic activity would not have contracted (other things being equal). At 8.6 per cent the saving rate is a little above its long-run average, since 1970, of 7.5 per cent.

3. The latest figures show unemployment is falling in the UK.

On both the Labour Force Survey measure, which shows a 7,000 fall comparing the latest three months with the previous three, and the claimant count measure, which shows a fall of 15,200 in December, unemployment has dropped in the last few months.

The unemployment rate has levelled off at just less than 8 per cent, having been just below 5.5 per cent when the recession began.

Given the depth of the recession, the increase in unemployment is surprisingly small. Although an increase in part-time working and a willingness to accept pay freezes have helped, the reasons for this are not yet fully understood by economists.

4. More people are working part-time.

There has been a sharp fall during the recession in the number of people working full-time. From its peak in April 2008, full-time employment has dropped by almost 4 per cent. However, there has been an increase of 3 per cent in the number of people working part-time – an acceleration of the underlying trend.

Some of this increase in part-time working has been involuntary and there are now over 1 million people who say they are working part-time because they cannot find a full-time job – up from 700,000 two years ago.

5. Activity in manufacturing has stabilised.

Ignoring the occasional erratic monthly number, manufacturing output was little changed throughout the whole of 2009.

6. Earnings are increasing very slowly.

Average earnings were up just 0.7 per cent over the year to the three months ending in November, with regular earnings (i.e. excluding bonuses) up 1.1 per cent. In the private sector regular earnings increased by just 0.2 per cent, while in the public sector (excluding the part-nationalised banks) they were up 2.9 per cent.

These figures indicate that domestic inflation pressures in the UK are very low.

7. Inflation has increased again.

Consumer price inflation increased to 2.9 per cent in December, its highest rate since March 2009. In part, inflation has increased because of higher petrol prices but food price inflation ended the year quite a bit lower than it was at its beginning.

Core inflation, which excludes food, alcohol, tobacco and energy prices, increased, from 1.2 per cent in December 2008 to 2.8 per cent in December 2009. This appears to be largely the result of the weakness of sterling leading to higher import prices for a range of consumer goods.

8. The public sector’s fiscal deficit has soared. Public sector net borrowing has been at record levels in the last two months (November and December) but the outturn in both months was a little below economists’ expectations.

In the first nine months of the 2009/10 fiscal year borrowing totalled £119.9 billion and is on track for the Pre-Budget Report’s forecast of £178 billion in the full year.

9. An end to quantitative easing?

There has been speculation that the Monetary Policy Committee might start to reverse its policy of quantitative easing (pumping liquidity into the economy through the banking system) after its February monthly meeting.

Whether they do so or not will depend on how they weigh up the lower than expected growth numbers and the higher than expected inflation numbers.

Recent speeches suggest there might be a split of opinion on the Committee so it could be a tight vote, though with the risks to the economy still seeming to be tilted to the downside, no change in policy is probably the more likely outcome.

This blog pointed out last October that one of the main reasons bankers are paid such extraordinary amounts of money is that the industry is fundamentally uncompetitive; ironically, it is not subject to the market forces it is supposed to represent.

Unfortunately this crucial point has been disappointingly absent from much of the policy debate on how to address the issue of eye-watering pay deals in the context of unprecedented government support.

Comfortingly, it appears that Left Foot Forward has at least the agreement of senior bankers themselves on this issue.

The BBC’s Business Editor Robert Peston reports that in a private meeting at the World Economic Forum in Davos, a financial supremo is to have stated that:

“Banks are a regulated oligopoly and are not subject to ‘proper’ competition: they are therefore able to pass on the costs of their people to customers.”

Peston explains that:

“In other words, banks are able to pay their people more-or-less what they like, free from the market disciplines that apply to genuinely competitive industries.”

Financiers will be delighted to know that following a number of “good discussions” with “lots of bankers” at Davos, the Shadow Chancellor has made it categorically clear that he does not favour breaking up the banks, contrary to the recent thoughts of the Governor of the Bank of England, arguing that:

“I fully understand that modern universal banks need to offer their customers investment-banking services.”

This vacuous tautology ignores the basic point that banks do not necessarily need to be universal – particularly given that the financial crisis was precipitated by this very universality.

Most of the customers that anyone cares about absolutely do not need investment-banking services. That this is an essential feature of financial markets is a ridiculous concept dreamt up to maintain the good life for the City.

At the same time, Mr Osborne has expressed resounding support for President Obama’s bank plan in an attempt to ride the bandwagon of public outrage against Wall Street. But no one, not even those with far greater financial acumen than Mr Osborne and his team, know what the Obama plan will actually do, or what the effects will be.

Odd, then, to offer unwavering support to what is without doubt a well-intentioned, but as yet undefined reform plan, whilst at the same time committing to maintaining the cosy status quo.

It’s great news that the Government will be introducing legislation to make the six months of maternity leave transferrable between parents.

This change will provide families with more choice as to how they balance their work and family lives, allow children to spend more time with their fathers and may be a step towards reducing pregnancy discrimination faced by women.

As ever, we can expect the usual uproar from parts of the business community, who continually refuse to recognise the role that regulations play in enabling economic growth, and have already claimed that this new right will have enormous costs for employers.

But what is the reality of the impact that such legislation has? The empirical evidence* suggests that paid maternity leave:

• Increases the time that women spend out of the labour market immediately after giving birth;

• Increases the likelihood of women returning to employment after the leave period runs out;

• Increases the likelihood of returning to the same job – i.e. it improves worker retention;

• Has much bigger effects than unpaid maternity leave – largely because women are much less likely to take unpaid maternity leave; and

• Has positive impacts on child health (measured by birthweight), a negative correlation with infant mortality, and a positive impact on mothers’ health outcomes.

These are clearly not business costs.

But it is hardly surprising that the British Chambers of Commerce do not include these benefits in their business burdens barometer, as its whole purpose is to pedal the myth that regulation is a destructive force, preventing job creation and harming corporate profits.

This orthodox economic position is ideologically, not evidence based, as some of the evidence below serves to illustrate.

Since 1997, the Labour Government has introduced a new set of minimum employment standards. These include the National Minimum Wage and the right to four weeks’ paid annual leave in the Working Time Regulations and maternity and paternity rights.

At the same time as these new rights were being introduced, employment levels in the UK rose sharply. For example, between 1997 and 2005, the total number of employee jobs increased by 2.1 million (9.6 per cent).

It is also worth noting that rights including the right to request flexible working, equal treatment rights for part-time workers and stronger protection against unfair dismissal have played a role in limiting job losses during the recent recession.

The OECD’s employment protection index ranks the UK as the second least protected of all developed nations, as is shown in the chart below:

If de-regulation is so necessary, why are so many other successful economies surviving with better protection for people at work? If regulation is such a key determinant of economic success, why have the US and the UK suffered so badly in the downturn?

The truth is that some of the world’s most productive economies combine good rights at work, strong trade unions and low unemployment. The idea that wealth creation only comes about when few have rights is simply wrong in a modern knowledge economy.

*Thanks to Howard Reed and Stewart Lansley for this evidence review – taken from a forthcoming Touchstone pamphlet

Tackling climate change by championing the additional benefits that flow from decarbonisation is a sound messaging strategy, which is winning support from various progressive thinkers.

It’s also the approach taken in a report published on Tuesday by a coalition of UK transport campaigning groups.

The coalition – which includes the Campaign for Better Transport, Friends of the Earth, and the national cyclists’ organisation, CTC – has issued a wish list of policy asks they want to see parties sign up to before the General Election.

Their report, “Improving Everyday Transport”, makes the case that introducing a raft of targeted changes to local transport systems can improve people’s quality of life in multiple ways.

These benefits include providing sustainable jobs (such as in constructing a greener bus fleet); tackling social exclusion and connecting communities (by ensuring low-cost public transport is available); improving health (through encouraging walking and cycling); and ensuring road safety (such as by dropping the speed limit to 20mph in residential areas).

At the same time, all these proposals also help cut carbon emissions. As the report points out, the Government’s “current carbon reduction strategy lets transport off the hook when it comes to reducing emissions”, but ensuring the sector takes on its share of the burden can also involve some win-win solutions.

This is explained by Roger Geffen of CTC, who says:

“When it comes to transport, the Government has in recent years tended to address all these areas – health, environment, safety – in isolation.

“Our intention is to highlight how a more joined-up approach would work better.”

Significantly, the group’s proposals also show how promoting behavioural change in transport choices can lead to savings in public expenditure. The report argues that there are clear opportunities for making budget savings by ditching expensive road building schemes and taxing aviation fuel, but also through adoption of the Smarter Choices measures, an agenda that’s been gaining traction amongst policymakers and local authorities over the last five years or so.

This would see less money being spent on concrete, and more on personalised travel plans:

“Crucially … there also needs to be a shift in the balance between capital and revenue funding, to support an expanded programme of ‘smarter choices’ measures … which give people opportunities to try out new ways of getting around in a sustainable and healthy way.

“Initiatives such as school and workplace travel plans, individualised travel marketing and cycle training are among the most cost-effective measures in transport, yet have historically been neglected due to the lack of revenue funding for transport.”

The proposal may face resistance at the Treasury, traditionally hesistant about switching from capital to revenue funding. But their analysis is spot-on, and shows that targeted investment, careful cuts and subtle behaviour-change policies can deliver a whole host of rewards – and, by the way, help stop climate change.

Our guest writer is Guy Shrubsole of the Public Interest Research Centre

On Channel 4 News last night, Ken Clarke categorically denied that he had ever called for a VAT cut. But Left Foot Forward can this morning reveal that in the autumn of 2008, Clarke called repeatedly for a VAT cut before and after it was announced in the pre-Budget report by Alistair Darling.

Last night in his TV debate with Business Secretary Peter Mandelson, Ken Clarke denied point blank that he had ever supported a cut in VAT.

SNOW: If we look into these figures, the real cause of getting the 0.1 per cent [growth] was the cut in VAT which you agreed with.

CLARKE: No I didn’t.

MANDELSON: You called for it before you were put into line by George Osborne.

CLARKE: No I did not call for it.

Watch it:

On November 11, 2008, following an interview on BBC News, Clarke was quoted in his local paper, the Nottingham Evening Post, in an article titled “Clarke suggests VAT cut”:

“It would have to be temporary because public finances could only take a short-term hit,” said the Rushcliffe MP.

“There is going to be a big drop in consumer spending, and a cut may encourage people to buy something which they otherwise wouldn’t have.”

Later that month in an interview to The Times, Clarke clearly calls for a VAT cut:

Despite his loyalty to the party leadership, he is not afraid to put forward his own ideas. The Government should, he says, consider cutting VAT to 15 per cent in the Pre-Budget Report on Monday – an idea that is certainly not Tory party policy. “If it’s possible to afford a fiscal stimulus I would go for VAT because the only case for a fiscal stimulus is to stimulate spending and consumer demand, so the tax on spending is the one to go for. But it should be temporary.”

Just two days later, Chancellor Alistair Darling announced the 2½ per cent cut VAT.

In the Commons on November 26, 2008, Clarke said:

“Everyone knows that my preference for fiscal stimulus, if we could afford it, would be a VAT reduction, but I do not have time to argue that case. All possible approaches have upsides and downsides, but VAT reductions have a bigger impact on big ticket items such as cars, furniture and carpets, particularly when we approach the magic period in which the temporary VAT reduction is about to go up again.”

Last night, Pat McFadden MP spoke on ‘The new industrial revolution’ as part of Progress’s ongoing lecture series on ‘New thinking for Britain’s next decade’. He spoke about the opportunities provided by the creation of a low carbon economy and attacked the Conservative’s approach to manufacturing.

McFadden began his speech by warning that the necessary switch from a high carbon economy to a low carbon economy may look like an “application for sainthood” if not communicated properly and without a firm policy footing.

The Business Innovation and Skills Minister stated that this second industrial revolution had to be fought on three fronts: environment, education and business. He argued that the low carbon economy will meet environmental concerns, provide new jobs and opportunities for business.

But preparation must begin now to ensure our education system is geared up to provide the people to work in low carbon industries. He also called for proper investment in research and development, and for necessary capital spending to take place.

He went on to warn that “David Cameron’s attack on these [capital] investment allowances holds a dagger at the heart of manufacturing industry”. Quoting a senior economist at the EEF manufacturer’s association, McFadden said:

“Reducing the level of capital allowances would be a big problem for manufacturers … cutting the rate to 12.5 per cent [from 20 per cent] would be a disaster for us”.

The minister concluded that, like the marriage tax allowance, it is high time that the Conservatives’ policies for business and the environment were put in the spotlight.

Our guest writer is Jacob Lister of Progress

As the economy emerged from recession, figures from the IMF – including data for 2009 – show that since 1997, Britain has had the highest per-capita rise in GDP in the G7. But critics are calling for an end to “unsustainable” growth.

As the chart below shows, Britain’s GDP per per capita rose 21 per cent since 1997, with GDP overall rising 28 per cent, behind only Canada (35 per cent) and the US (31 per cent).

The growth in GDP was responsible for creating millions of jobs, providing a better standard of living for a decade, and mending the broken public services infrastructure. Although some, including James Purnell, have pointed out that, “GDP had been artificially inflated by the housing and financial bubble.”

A new campaign by the New Economic Foundation is arguing that “indefinite global economic growth is unsustainable” while campaign group 38 degrees are calling for an end to the “fixation” with economic growth.

A new website and YouTube video, The Impossible Hamster, has been set up to promote the campaign.

Watch it:

Official figures released today by the Office for National Statistics (ONS) show UK GDP increased by 0.1 per cent in the final quarter of 2009. This means that the UK’s longest and deepest recession since the 1930s ended in the third quarter of last year. GDP contracted for six consecutive quarters from Q2 2008 to Q3 2009 inclusive and by a total of 6 per cent.

However, an increase in GDP of just 0.1 per cent is not much to celebrate and falls short of the 0.3 per cent gain that was widely forecast by City economists.

• Output in both the service and production industries increased by 0.1 per cent; construction output was unchanged from the third quarter.

• Manufacturing output increased by 0.4 per cent, having fallen in eight of the previous nine quarters. The Government’s car scrappage scheme probably helped, though some of the increase might simply reflect companies rebuilding inventories.

• However, the increase in manufacturing output was offset by a 3.3 per cent fall in output in the electricity, gas and water supply industries.

• Output in the distribution, hotels and restaurants sector also increased by 0.4 per cent, having increased by 0.7 per cent in the third quarter. Motor trades and retail made the largest contribution to the increase.

The prospect of the car scrappage scheme ending and VAT increasing from 15 per cent to 17½ cent from January might have temporarily boosted retail activity, and raises the possibility of a reversal of fortunes in the first quarter of 2010.

At this stage, the ONS does not give any details of what happened to consumption, investment or exports in the fourth quarter of last year. However, based on the data it has released, and on the monthly indicators, it appears that consumer spending was growing very slowly in the fourth quarter but that investment spending probably contracted.

Meanwhile, the hoped for strong recovery in exports – helped by the fall in sterling since the financial crisis broke – seems not to have happened yet, probably due to the weak nature of the economic recovery in other major economies (with the notable exception of China).

Overall, it looks like the worst of the recession is behind us – an impression confirmed by recent data on unemployment and on consumer and business confidence – but a sustainable recovery is not yet in place. Indeed, the increase in VAT in January and the end of the car scrappage scheme might mean any GDP gain in the first quarter of 2010 is also disappointing.

Until there is evidence that private demand (i.e. household consumption, company investment and overseas demand for UK exports) is strengthening, any suggestions that monetary policy should be tightened (because of higher inflation) or fiscal policy should be tightened more than the government currently plans (because of the fiscal deficit) should remain suggestions only.

The risk of action is too great.

As a final point, it should be remembered that this is only the preliminary estimate of GDP, based on around 40 per cent of the data that will be used in the final estimate. There is plenty of opportunity for growth to be revised up – or down.

Tomorrow’s GDP figures should have Labour pollsters champing at the bit; a return to growth could be just the shot in the arm that Gordon Brown needs to keep his election hopes alive as the national economy finally turns the corner. In many places, however, it won’t be feeling like the good times are back.

Last Monday, the Centre for Cities’ “Cities Outlook” report showed that the recession has widened the gap between the UK’s best and worst performing cities – a divergence we expect to continue during the recovery. The persistence of this gap suggests that we need a new urban policy, one that’s more realistic about the different capacity of cities to grow.

Policy needs to work with the grain of economic reality. Despite a decade of investment through the Regional Development Agencies, the South East has continued to grow faster than the North. Academic literature suggests regional convergence is by no means certain to occur.

Cities with real economic potential need to be allowed to grow, allowing more houses to be built in areas of high demand and investing in transport infrastructure. Reducing living costs in growing cities would give people a choice so that if they want to move to work in more vibrant economies they can. In Cambridge the typical first-time buyer’s house costs ten times their salary. Such a situation is not great for labour or social mobility.

And for the likes of Stoke and Burnley this means a reality check. Reinventing their economies into a bioscience or green technology cluster is unlikely, despite the rhetoric of local politicians searching for an answer. Improving the skills level of people in these places will improve their employability and aid their mobility.

Connecting struggling cities to larger, dynamic cities where jobs are being created could also increase people’s opportunities. It is no panacea, but if transport links between Bradford and Leeds were improved, unemployment in Bradford would probably fall.

Labour’s regional policy has aimed to achieve equal growth, everywhere. Unfortunately the data shows us that this isn’t very likely. Most economic activity takes place in big cities. Forty per cent of England’s jobs are in Greater London, Birmingham, Leeds, Liverpool and Manchester. The party has started to acknowledge this with its creation of City Regions in Manchester and Leeds, but there is further to go.

We are not suggesting that government stops spending money in less successful cities; improving the quality of people’s lives in struggling cities is a socially desirable outcome in itself, but it would help to be clearer about the aims of such policies.

Overstating potential economic benefits that such spending might have – in term creating knowledge jobs – rather than focusing on the real benefits to people, by improving the areas they live in, has resulted in a lot of money being spent on the wrong things.

If the recession has taught us anything, it is that politicians should be a little more contrite about their ability to shape the economy. As the election battle kicks off the parties should ensure that their manifesto commitments help cities with the potential to grow to drive the economic recovery, while being more realistic about the objectives of government spending in less prosperous areas.

Our guest writer is Kieran Larkin, an analyst at the Centre for Cities

Vince Cable used a wide-ranging speech at Demos this morning to set out his party’s economic manifesto. But he conceded that his party’s flagship tax policy was not as radical as other approaches to redistribution.

Asked by Left Foot Forward about his policy of raising the tax threshold to £10,000, which the Lib Dems estimate would lift 3 to 4 million people out of taxation but would also result in a £700 tax giveaway to all earners including the wealthiest, Cable said:

“[The tax credit system] doesn’t work well and has been condemned among other things by the Ombudsman and the CAB [Citizens Advice Bureau]…

“So trying to invent very, very targeted programs – of the kind represented by the tax credit system – I don’t think is the best way of dealing with it.

“A simple tax cut which takes people out of tax altogether so low paid workers and pensioners – a lot of them – just don’t fill in a tax form, don’t need to go anywhere near it, is a much cleaner way of dealing with it although [indistinct] it’s redistributive effects may be not quite as radical as you get with tax credits.“

As briefed yesterday evening, the Liberal Democrats’ Treasury spokesman talked about banking reform and set out how he wanted to see UK Financial Investments “giving a much firmer steer to those banks to act in the wider national interest,” a reference to the takeover of Cadbury’s by Kraft using financing from RBS, a part-nationalised bank. In addition to this and tax reform, Cable discussed his parties’ approach to the fiscal deficit and a strategy for sustainable growth.

Cable said the Conservatives were “wrong to be so dogmatic” on the speed of deficit reduction. He went on to say:

“The government plan to reduce this deficit by half over four years may also prove to be too laid back for the markets. It is however a starting point. It is also a major challenge and tough by the standards of previous fiscal tightening.”

Speaking on regulatory supervision, he described the Conservatives’ plans to break up the Financial Services Authority as “not clever”:

“I don’t agree with George Osborne that it’s sensible to split [the FSA] up. The implication of splitting it up is … [separating] systemic risk and consumer protection so you lose the joint working … You end up spending a year, two years with people jostling for jobs in these new institutions.”

The leading Republican pollster who is credited with assisting the Republicans in blocking action on climate change during the Bush years now says he thinks there is strong bipartisan support for the US to curb its climate change emissions.

A New York Times editorial in 2003 explained, “Whenever the Republicans find themselves in trouble on environmental issues, the call goes out for Frank Luntz” and in that year Luntz made headlines when he prepared a memo – ‘The Environment: a cleaner, safer, healthier America’ – for the Republican leadership on how to win “the environmental communications battle,” and it was leaked to the press.

The New Republic remembers how Frank Luntz used to be known as the guy who wrote a 2002 memo advising the Bush administration to “make the lack of scientific certainty a primary issue in the debate [about global warming].” But now Frank Luntz writes:

“A clear majority of Americans believe climate change is happening. This is true of McCain voters and Obama voters alike. And even those that don’t still believe it is essential for America to pursue policies that promote energy independence and a cleaner, healthier environment.

“Americans want clean, safe, healthy, secure energy.  That’s why Republicans and Democrats alike strongly support action to address climate change.  Sure, Republicans are more concerned about the national security component and Democrats the health component, but support for action right now spans all partisan and ideological lines.”

Mother Jones reports that Luntz is now advising American environment groups on how to better communicate the climate issue, notably by not mentioning climate change! Climateprogress.org reports this afternoon that Obama’s chief pollster, Joel Benenson, agrees on the level of bipartisan support for climate action after polling he conducted in 16 battleground states. He writes:

“As 2010 begins, public support for an energy and climate bill remains strong. Overall, 58% of likely 2010 voters support the bill and just 37% oppose it when told the following:

‘This past summer, the U.S. House of Representatives passed an energy bill that limits pollution and greenhouse gas emissions through what’s been called a Cap and Trade plan and also invests in clean, renewable energy sources in America. Soon, the Senate will debate it. Support/Oppose for Energy Bill that Contains Cap and Trade’.”

Benenson found that 56 per cent of voters would be more likely to re-elect their Senators than vote for the bill, with only 35 per cent less likely to vote for re-election. On the other hand, half of voters would be less likely to vote to re-elect their Senator if s/he voted against the bill, while only 39 per cent would be more likely to vote for re-election.  In other words, support for limits on global warming pollution would be a net political plus in these battleground states. Left Foot Forward reported earlier on numerous other polls showing broad bipartisan support for Obama’s climate plan.

(Hat tip: Climate Progress.)

On Tuesday, Left Foot Forward reported attempts by big carbon industry, via one of its friends in Congress, to cut Obama off at the knees on climate change; you can read more detailed analysis on this development from our sister site in the US, Think Progress.

Now there is mounting noise, following Scott Brown’s win in Teddy Kennedy’s old seat, that Obama’s climate reforms like his healthcare reforms could hit the rocks as swing state Democrats start wobbling.

For example, the Financial Times reports “US Cap and Trade bill looks even further away” and The Guardian says “Democrats unlikely to touch climate legislation this year”.

This comes after some supporters of the Bill, like the Senate Energy and Natural Resources Committee chairman, Sen. Jeff Bingaman, said that passage of the legislation was unlikely and Pennsylvania Governor Ed Rendell, a Democrat, called the bill “impossible to pass.”

But Senator John Kerry, who is leading the climate reforms in the Senate, says:

“This is the single best opportunity to create jobs, reduce pollution, and stop sending billions overseas for foreign oil from countries that would do us harm. Sell those arguments and you’ve got a winning issue.”

The polls suggest he’s right.

Left Foot Forwarded reported back in October how six in ten independents support Obama’s climate plan. Recent polls produced similar evidence of broad support for Obama’s ‘cap and trade’ plan.

This all runs contrary to much of the media coverage and counters suggestions that Obama needs to run from his climate reforms or water them down.

As Howard Dean explained last night in relation to healthcare, America’s progressive majority want more change, not less. They voted for the Obama who said of climate change:

“Delay is no longer an option. Denial is no longer an acceptable response.”

And, as Simon Schama wrote in the Financial Times yesterday, it’s time to fight back:

“It is just that he (Obama) may actually need to respond to the unrelenting pressure from zombie conservatism, ravenously flesh-eating and never quite dead, not by turning on more consensual charm, but by taking the gloves off.”