Good economic news can’t hide falling wages or an unsustainable bull market

Ben Gummer MP

An Ipswich MP has highlighted the improving economy in his weekly column in the Ipswich Star, but has failed to spot two big fears – falling wages and a booming stock market.

Ben Gummer MP writes about the number of small businesses starting up in and around his offices in Fore Street, using this to illustrate his vision of a healing economy, with rising growth and falling unemployment, record employment and falling inflation.

He highlights the welcome news that claimants of Job Seekers Allowance have fallen below 4,000 people again, and is only 148 claimants above where it was at the time of the General Election back in 2010. He mentions that long term unemployment, whilst still far too high, has fallen for the last couple of months. And he says that youth unemployment is marginally lower than when he was elected, and has been falling for a year.

Almost as an aside he mentions one of the biggest threats to the long term health of the economy, that “most people are being squeezed between rising prices and incomes that have not kept pace.” He writes that inflation is falling again, and millions are being taken out of tax altogether, implying this will stop the fall in real-terms wages.

This, he says, is the reason that the stock market is at an all time high. Well maybe. But that is even more doubtful than his vision on real-term wages. Firstly, the stock market hit the highest level in thirteen years this week, on Wednesday, not it’s all time high. Secondly, the boost in the bourses around the world has not been driven by the great economic data but by central banks buying up billions of pounds of assets. And lastly, perhaps indicating the dangers of writing about the great stock market figures, it has fallen for the last two days, including the largest fall this year, after poor performance by HSBC and a hint that the US Treasury might cut back on the stimulus.

Taking real-term wages first, though, it is clear that with inflation outperforming wage rises people will have less and less money to spend. It is also clear that many of those burned in the 2008 crash will be more circumspect about their spending, preferring to save rather than use credit. Actually that isn’t a bad thing, the Government wants to reduce the amount of reckless borrowing that became a feature of the last boom. Continued falls in real-term wages will mean that people have less money to spend on anything beyond essentials. So far this hasn’t shown up in consumer spending, which has risen for the last six months, but it will do eventually if the Government doesn’t tackle it.

Action like that taken by Ipswich Borough Council, introducing a living wage, can help, as would a rise in the basic level of the national minimum wage. The Tory led Government doesn’t seem to see this though, instead many Tory MPs have fallen back on the old rhetoric that the national minimum wage destroys jobs, without any evidence for this whatsoever – it didn’t destroy jobs when it came in, and employment is now at record levels despite the NMW and an economically turbulent period.

Further work to pull down inflation will help, as would some easing of pay restraint by businesses – maybe some fiscal loosening on employment taxes like national insurance, especially at the lower end of the pay scales. Cutting the taxes of those earning between ten thousand pounds and fifteen thousand pounds to ten percent would also make a big difference, but that would be horrendously expensive in the short term.

As for the stock market, is it any wonder that it has been booming recently, along with just about every other stock market around the world. They are benefiting from what looks like a win-win situation, for the moment at least. Share prices gain when economic news is good, because that means companies should do better. But they can also gain when the news is not so good, because that increases the likelihood central banks will engage in further asset purchases – quantitative easing – thus boosting markets via that route.

Johannes Jooste of Merrill Lynch Wealth Management notes that even when economic data has disappointed, as some recent numbers from America and China have, “continued easy monetary policy supported global equity markets”.

The Bank of England’s monetary policy committee stayed its hand on Thursday but other central banks are engaging in plenty of unconventional activity in the form of asset purchases, including America’s Federal Reserve, $85bn (£55bn) a month, and the Bank of Japan with a monthly $79bn (£51bn).

The European Central Bank, which cut interest rates earlier this month, is contemplating purchases of asset-backed securities made up of loans to small firms. The Bank, with Mark Carney set to arrive within weeks, may not have done yet. This month has seen a slew of interest rate cuts, from central banks in India, Poland, Denmark, Korea, Vietnam and Australia, amongst others.

Some people will see this as a good thing. Mr Gummer included, if his Ipswich Star column is anything to go by. Conventional wisdom says that booming markets boost wealth, increase business confidence and make it easier for firms – larger ones at least – to finance expansion.

But you can have too much of a good thing. When does the rise in stock markets, given that much of it is driven by the actions of central banks, become dangerous? When does it become a bubble whose bursting would be very damaging?

The risks are there, and they are present in the fact that markets have moved well ahead of real economic activity. Markets that are mainly driven by monetary policy are, by their nature, unsustainable.

Just weeks ago, David Smith, Economics Editor of the Sunday Times, suggested that “any sign central banks were ready to start tightening policy, by raising rates or selling back some of the assets they have purchased, would send markets diving.”

Well it’s happening. The FTSE hit near 13-year highs this week but that rally stalled on Thursday over concerns that the U.S. may soon scale back a stimulus measure known as quantitative easing (QE) due to increasing signs of a recovery in the U.S. economy.

“Investors are now worried about the end of QE, and no-one wants to be left without a chair when the music stops,” said IG chief market strategist David Jones.

With falling real-term wages, an unsustainably bullish FTSE stuttering as gravity sets in, and unemployment a constant worry for many in jobs across Ipswich, maybe it is too early for Mr Gummer to be looking for green shoots.

New education partnership will see radical changes

Schools in Hackney and Suffolk are joining forces as part of a raft of new proposals to improve educational attainment in the county.

A new partnership, designed to stimulate new thinking and create the impetus for more radical change within the county’s education system, has been set up following a 10-month independent inquiry into school performance in Suffolk.

Published today, the report by the Royal Society for the encouragement of Arts, Manufactures and Commerce (RSA) points to improvements that were achieved in schools in the London borough and argues that gains can be achieved if a similarly ambitious and focused approach is taken in Suffolk.

Between 2005 and 2012, the percentage of Hackney children achieving Key Stage 2 (level 4 or above) in English rose from 69% to 86% – matching the national average for the first time in seven years. In the same period, the percentage of children achieving the equivalent level in maths rose from 64% to 86%, beating the national average by 1%. The rise in GCSE performance was equally significant with the percentage of children gaining A*-C grades (including English and maths) increasing from 34.2% (10.5% below the national average) to 60.2% (0.8% above).

Whilst performance in Suffolk has also improved, it has not done so at the same rate at other areas – forcing the county down the Key Stage 2 and GCSE league tables.

The new Hackney-Suffolk partnership will see a cultural, professional and educational exchange programme set up to benefit both areas – designed to enrich pupils’ learning, broaden teachers’ professional expertise and strengthen leadership at all levels. A new exchange programme for teachers tipped to one day become heads will also be set up.

Councillor Lisa Chambers, Suffolk County Council’s cabinet member of education, skills and young people, said:

“When we commissioned the RSA to lead the Raising the Bar inquiry, we had one very clear objective in mind – to find solutions that would help improve the educational attainment of Suffolk children now and in the future.

“Whilst we will take time to assess fully all the report’s recommendations, the proposed partnership with Hackney is something we’re very positive about and have already started to implement. This isn’t about replicating exactly what Hackney has done because that wouldn’t necessarily work in Suffolk. We know that much can be achieved from closer working with them and that fresh ideas will come from partnerships like this.

“Educating young people is both our moral and social duty and as such, Suffolk County Council has made it clear that improving the attainment is our number one priority.

“We all want to give our children the very best start in life and this report sets us on a stronger and more focused path to success.”

This is just the first in twenty recommendations provided by a hard-hitting RSA report that pulls no punches but offers genuine hope for the future. The County Council are expected to respond to the report in July.

The full report can be read here and the executive summary can be read here.

Bee promises education will be his priority

Mark Bee promised the people of Suffolk more of the same for the next four years, in his speech to the first full council meeting of the new council.

Claiming that, since the Tories were returned with a majority, his administration had a mandate to carry on as before, he read out a list of proposals for the next four years. His top priority, he said, would be education. Raising the Bar and completing the Schools Organisation Review would be the responsibility of his deputy, Lisa Chambers, underlining his commitment to education.

He also committed to push for economic growth and jobs in Suffolk, more apprenticeships, a new travel card for young people, high speed broadband for every part of Suffolk, the energy from waste incinerator, the Greenest County, to support Care UK as they build 10 new care homes, to work with the police to keep Suffolk safe, and to freeze Council Tax for the next four years.

Parts of his speech were broadly welcomed by opposition parties, especially the renewed focus on education, and Opposition Leader Sandy Martin pledged to work with the administration where they agreed, but to shine a light on every wrong decision and any wasteful spending. In a statesmanlike speech, described by one senior Tory as the best opposition speech they’d heard in the chamber, Cllr Martin underlined that the electorate had clearly wanted a focus from those in power on the things that worried them – jobs and the economy, education, and areas of wasteful spending, like the incinerator project, should not be put ahead of the people’s priorities.

The Annual Suffolk County Council meeting was held at Endeavour House in Ipswich

He also highlighted the level of reserves held by the authority, hitting out at the financial competency of an administration that holds huge levels of reserves, and adds to them even in a time of cuts and economic turbulence.

UKIP leader Bill Mountford said that he took heart from the leader’s speech, especially his commitment to the public, and the involvement of all the council in decision making, whilst Liberal Democrat leader David Wood welcomed the focus on education, saying, without realising the pun, that Raising the Bar mustn’t be the “Bee all and end all”. He reminded the ruling Tories of how dire education had become under their reign and insisted he’d be holding them to account.

Green & Independent group leader, Mark Ereira-Guyer, welcomed the more inclusive intentions of the leadership, and reminded the council that whilst there may only be two Green councillors, some seventeen thousand people had shared their commitment to keeping Suffolk a green and pleasant land.

SCC: Focus on troubled families will be led by Joanna Spicer

Cllr Joanna Spicer will lead work on Troubled Families

Troubled families will be a key area of focus in Suffolk, the newly-re elected leader of the the county council has said.

Speaking at the authority’s Annual General Meeting yesterday, council leader Mark Bee said that a tragic case of a mother in Lowestoft, who in April took her own life and that of her three children, demonstrated the need for public bodies to do more to support families in need of help.

He highlighted a programme of support which has already been set up to help over 400 troubled families across Suffolk, and appointed Councillor Joanna Spicer to head it up.

Cllr Bee told the meeting that “Suffolk has already been praised for our work with troubled families, which of course is good to hear. But the fact remains, we simply must do more: to help prevent such tragedies happening again, and to work, with all our partners, as one, to find ways of helping such families through difficult times and circumstances.”

He said he had asked Cllr Spicer, both as Chairman of the Health & Wellbeing board, and as a councillor with vast experience, to lead on troubled families, adding he wanted her “to bring people together and develop the most effective ways we can of helping people faced with such challenges, so we can guide them through these problems and out the other side. I can think of no-one better to lead on this absolutely vital work.”

Improving educational attainment across Suffolk was announced as the county council’s top priority over the next four years. Fundamental to this will be responding to and implementing many of the suggestions in the Raising the Bar inquiry report which is being released today.

Other key priorities going forward include the completion of the School Organisation Review, a continued push for economic growth via suffolk’s Growth Strategy, the roll-out of high-speed broadband across every part of Suffolk, the completion of Suffolk’s energy-from-waste facility, and to continue to work with Care UK as they build 10 new state-of-the-art care homes.

Cabinet appointments made at yesterday’s AGM include:
Councillor Mark Bee, leader of the county council and cabinet member for resource management
Councillor Lisa Chambers deputy leader and the cabinet member for education, skills and young people.
Councillor Graham Newman will be the cabinet member for roads and transport.
Councillor Colin Noble, the cabinet member for finance
Councillor Colin Spence, the cabinet member for public protection and voluntary sector liaison.
Councillor Alan Murray as cabinet member for health and adult care,
Councillor Richard Smith as cabinet member for economic development, environment and planning,
Councillor Beccy Hopfensperger in a new role as cabinet member for localities.

Assistant cabinet appointments:
Councillor Robert Whiting, assistant cabinet member for resource management
Councillor Gordon Jones, assistant cabinet member for education, skills and young people
Councillor Jenny Antill, assistant cabinet member for health and adult care
Councillor Mary Evans, assistant cabinet member for roads and transport
Councillor Anne Gower, assistant cabinet member for economic development, environment and planning
Councillor Andrew Reid, assistant cabinet member for finance
Councillor Michael Ladd, assistant cabinet member for localities
Councillor Patricia O’Brien, assistant cabinet member for public protection

During his speech Councillor Mark Bee, congratulated his fellow councillors on election and put to them the challenge of the years ahead.

He said “I also take this opportunity to congratulate everyone sitting in this chamber, my fellow councillors, on your election, or re-election. It is to us all that the county council, and Suffolk as a whole, look for leadership in these challenging times, and I look forward to working with you all over the next four years.”

Tories cause mischief when Labour councillor is late

The Tories in North East Ipswich have upset the Labour apple cart by taking advantage of a missing Labour councillor to appoint one of their number, Richard Pope, to Chair the North East Area Committee.

North East Area is one of two Area Committees that are finely balanced politically, with five Labour councillors outnumbering four Tories. But because all committees need new Chairmen following the Annual Council meeting, one missing Labour councillor left the committee tied on four votes all.

Deputy Council Leader Neil Macdonald was not at the start of last night’s meeting of the committee, held at St John’s Hall in Cauldwell Hall Road, and so when nominations for Chairman were called for, Labour nominated Cllr Alasdair Ross to continue in the roll for another year, but Cllr John Carnall nominated fellow Tory Cllr Richard Pope.

Since the vote was tied at 4 votes each, Cllr Ross reluctantly relinquished the Chair, seconding the motion for Cllr Pope to be Chairman. Cllr Pope was duly elected as Chairman of the North East Area Committee.

When Cllr Macdonald arrived, about an hour after the start of the meeting, Labour councillors tried to table a vote to re-elect Cllr Ross as Chairman for the next meeting, but they were told by the officers that this was unconstitutional.

Ironically Tory councillors in North West Ipswich could have done the same thing last week, had they thought of it. Cllr Martin Goonan was not at the North West Area Committee, but the Tory group leader and deputy leader didn’t bother to nominate an alternative, so Albert Grant was elected. Had the Tories taken the Chairmanship of this committee as well, it would have left Labour with just two of the five Area Committee Chairs come the meeting of Area Committee Chairmen on 6th June, since it has been confirmed by IBC that Cllr Keith Rawlingson is not the current Chairman of South East Area Committee, because the meeting wasn’t held to re-appoint him.

Some may argue that this is all very petty and doesn’t hold with the constructive opposition Cllr Chris Stewart promised, but the Area Committees have become dominated by the Chairman, who controls the agenda. By taking the Chair from Cllr Ross, the Tories effectively control the agenda of the next Area Committee. Indeed there is a question as to whether the issue of Chairman can be revisited within the year, since the wording of the motion is usually to appoint a Chair until the next Annual Council meeting. This would mean the Tories had control of the agenda in North East Ipswich for the next year.

Labour are likely to try and wrest control back from the Tories, if the constitution allows, because the Special Responsibility Allowance that attaches to the Chairman of an Area Committee is substantial. The new Tory group chairman of Suffolk County Council Tory group would be wise to take heed of what opposition groups can do when committees are finely balanced, in ensuring that all Tory councillors turn up to the committee meetings they are supposed to.

New school will be open by 2015

Ben Gummer MP has told Ipswich Spy that Suffolk New Academy (Chantry High School) will be rebuilt in 2014, with the design work likely to start in July of this year.

The school was originally part of the Building Schools for the Future scheme and when this was scrapped by the incoming coalition Government, because the money wasn’t there to complete the scheme, Mr Gummer took on the commitment to getting the school rebuilt.

Last year came the good news that the school had been included in the Priority Schools Building Programme, after two years of fighting to get the investment that was desperately needed to rebuild for the future. But after a year of delays and silence from the Department for Education, we understand that the school can expect diggers on site by July next year.

There is great news today: work will begin on Suffolk New Academy in the summer of 2014 and will open summer 2015.

— Ben Gummer (@ben4ipswich) May 24, 2013

Ipswich’s Tory MP, Ben Gummer, is celebrating the news that Suffolk New Academy, the former Chantry High School, will be completely rebuilt and open by the summer of 2015, with a pledge that diggers will be on site by July 2014.

Exciting news today.Our new building project has been brought forward.The new buildings are set to open in 2015. Fantastic news!!!

— Suffolk New Academy (@SuffolkNewAcad) May 24, 2013

We understand that the school will be rebuilt from capital funds, rather than relying on PF2, the Government’s new private finance initiative. There has been a significant problem in attracting infrastructure investment from the private sector, which has led to much higher levels of direct capital investment by the Government.

Suffolk Tories split over group chairman

The first challenge to Mark Bee’s authority as Leader of the Tory group on Suffolk County Council has resulted in the withdrawal of his nominee to be Group Chairman, Joanna Spicer.

Halesworth Councillor Tony Goldson was nominated last week by Guy McGregor and Anne Gower, in a move seen by many as a challenge to Mark Bee’s authority.

Cllr Spicer was not prepared to comment to Ipswich Spy, but in an email to her colleagues she withdrew her nomination and called for unity behind Cllr Bee as leader. “I do not know Tony well as he is a relatively new member but am sure he will represent you all at cabinet as you wish. I am happy to support him in his wish to do this job and hope you will unite behind him and Mark as Leader.”

Cllr Bee had announced that Joanna Spicer would be joining the Cabinet as Member without Portfolio and she was his nomination as Chairman of the Tory group. For her to be removed in this way will be seen as a major challenge to his authority, with fingers pointing directly at Guy McGregor as the likely dissident-in-chief. Cllr McGregor was sacked as Cabinet Member for Roads and Transport just three weeks ago and is likely to be elected Chairman of the Council at this afternoon’s meeting.

It is a remarkable turnaround and shows the commitment of the Tory leadership to avoid splits at all costs – had Cllr Spicer not withdrawn her candidacy she would almost certainly have won, but at a cost to unity. Grumbles have been growing about the work ethic of Tory leader Mark Bee, who inherited a majority of thirty five, only to see that reduced to just three.

It will be vital for the Tories to maintain strict group discipline over the next four years, as their wafer thin majority could cause them real problems. If anyone is missing from the council meeting, they could lose the vote for Chairman, in the same way as the Tory & Lib Dem coalition lost the vote on who should be Mayor of Ipswich back in 2004 because Louise Gooch was on holiday.

If there are more of these damaging splits caused by those who think they would be better as leader it could cost the Tories badly.