George Osborne during a visit to the Royal Mint in Llantrisant, Wales. Photograph: Getty Images.
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Under the bonnet of the UK's economic recovery all is not well

To resign ourselves to a return to the economic pathologies of the past, as the Tories do, would be to miss a historic opportunity.

Last month, the OBR confirmed that Britain is now experiencing growth of over 2 per cent. After the slowest recovery from a recession on record – partly because of the depth of the impact of the crash, partly because of the fiscal austerity chosen by this government – we should all welcome this news, whatever our views on economic policy or our party affiliations. To do otherwise is not simply churlish: it is self-defeating for those who want to make the case that there are serious problems with the UK economy, and with the policy choices this government is making. And I think there are some very serious problems.

To see what the problems are, you need to look under the bonnet of the UK recovery. Firstly, it is a recovery predominantly fuelled by consumption, more than any other major economy. Where is this consumption coming from? Partly from the expansion of household debt, which reached a record high at the end of 2013. And partly from people running down their savings to spend more. Between January 2012 and December 2013, the UK savings ratio went from 8 per cent of GDP to 5.4 per cent. Germans save nearly twice as much as that. 

Secondly, it is a recovery of an economy that is relatively inefficient. Our productivity has gone from bad to worse since the crash, and is now about 20 per cent below the average of our G7 competitors. This year, Britain’s trade deficit is predicted to rise to the highest level of any industrial country in 2014, its highest level for a quarter of a century. And what about investment? As a share of GDP, investment in the UK economy dropped by a quarter in the five years after 2008. We now rank 159th in the world, just behind Paraguay and Mali.  

Thirdly, it is a recovery whose benefits are being felt by a very few, not by the broad majority. And not any old "very few" either. City bonuses are predicted to be 15 per cent up on last year. Meanwhile, average earnings are £1,600 a year lower than at the last election, and earnings will only have grown by half the level of the overall economy by the next election. The median household has seen their income drop by nearly 4 per cent since the recession. In our country, the poorest 40 per cent have the lowest share of national wealth of any western country.  

However you cut it, our economy has a problem in the engine room. We are too dependent on housing and debt for family incomes, too dependent on consumption rather than saving and investment, too dependent on an under-skilled workforce, and too dependent on low-wage and insecure jobs.  

But let’s be honest about these problems. They are not being addressed by this government, but they were not caused by it either. Nor are they problems that will be rectified in one policy heave, but instead require a determination to address them over a number of years. The question is: what is to be done?

This is where a clear choice between Labour and the Conservatives starts to emerge. The Conservatives’ answer has two parts. First, to say that the return of growth is the definition of economic success. Second, to double down on the economic model created after 1979. In George Osborne’s view, there is no point trying to reform the way our economy works. It is what it is. The role of government is to feed the low-wage, low-skill monster.  

That’s why the Tories prioritise further labour market deregulation in an economy that is among the most deregulated in the OECD. It’s why they want to revisit UK membership of the Social Chapter, 20 years on from the last debate about it. It is why they refuse to tackle zero-hours contracts. It is why they are happy to subsidise demand for housing yet preside over historically low levels of housebuilding activity. It is an approach based on the policy recipes of the 1980s and 1990s. And it won’t fix what doesn’t work.

The response of Labour under Ed Miliband’s leadership is different. We refuse to accept that there is nothing to be done about the snapping of the link between the fortunes of the economy and those of working people. Britain's problems with productivity, competitiveness and living standards are interconnected, and demand a thoroughgoing reform of how our economy works. That’s why Ed Miliband has said that the government he leads will prioritise a transformation of our banking system, resetting the energy market, a new target of building 200,000 new homes a year, a revolution in apprenticeships and technical education in our schools, and a historic transfer of many of the levers of economic policy from Whitehall to city regions and county-regions.

The easy response to the return of growth after such a long wait is to say that this agenda for fundamental reform is both too difficult and unnecessary. I strongly believe that would be a mistake. As Britain emerges from the most devastating and prolonged downturn of the past 100 years, to resign ourselves to a return to the economic pathologies of the past would be to miss a historic opportunity. As long as Britain’s international ranking on skills, investment and productivity is so low, and on inequality, centralisation and poverty so high, there will be a need for a government that sets itself the defining challenge of reforming the way our economy works. That is the challenge that Ed Miliband will meet.

Stewart Wood (Lord Wood of Anfield) is shadow cabinet minister without portfolio and an adviser to Ed Miliband in the leader's office

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A global marketplace: the internet represents exporting’s biggest opportunity

The advent of the internet age has made the whole world a single marketplace. Selling goods online through digital means offers British businesses huge opportunities for international growth. The UK was one of the earliest adopters of online retail platforms, and UK online sales revenues are growing at around 20 per cent each year, not just driving wider economic growth, but promoting the British brand to an enthusiastic audience.

Global e-commerce turnover grew at a similar rate in 2014-15 to over $2.2trln. The Asia-Pacific region, for example, is embracing e-marketplaces with 28 per cent growth in 2015 to over $1trln of sales. This demonstrates the massive opportunities for UK exporters to sell their goods more easily to the world’s largest consumer markets. My department, the Department for International Trade, is committed to being a leader in promoting these opportunities. We are supporting UK businesses in identifying these markets, and are providing access to services and support to exploit this dramatic growth in digital commerce.

With the UK leading innovation, it is one of the responsibilities of government to demonstrate just what can be done. My department is investing more in digital services to reach and support many more businesses, and last November we launched our new digital trade hub: www.great.gov.uk. Working with partners such as Lloyds Banking Group, the new site will make it easier for UK businesses to access overseas business opportunities and to take those first steps to exporting.

The ‘Selling Online Overseas Tool’ within the hub was launched in collaboration with 37 e-marketplaces including Amazon and Rakuten, who collectively represent over 2bn online consumers across the globe. The first government service of its kind, the tool allows UK exporters to apply to some of the world’s leading overseas e-marketplaces in order to sell their products to customers they otherwise would not have reached. Companies can also access thousands of pounds’ worth of discounts, including waived commission and special marketing packages, created exclusively for Department for International Trade clients and the e-exporting programme team plans to deliver additional online promotions with some of the world’s leading e-marketplaces across priority markets.

We are also working with over 50 private sector partners to promote our Exporting is GREAT campaign, and to support the development and launch of our digital trade platform. The government’s Exporting is GREAT campaign is targeting potential partners across the world as our export trade hub launches in key international markets to open direct export opportunities for UK businesses. Overseas buyers will now be able to access our new ‘Find a Supplier’ service on the website which will match them with exporters across the UK who have created profiles and will be able to meet their needs.

With Lloyds in particular we are pleased that our partnership last year helped over 6,000 UK businesses to start trading overseas, and are proud of our association with the International Trade Portal. Digital marketplaces have revolutionised retail in the UK, and are now connecting consumers across the world. UK businesses need to seize this opportunity to offer their products to potentially billions of buyers and we, along with partners like Lloyds, will do all we can to help them do just that.

Taken from the New Statesman roundtable supplement Going Digital, Going Global: How digital skills can help any business trade internationally

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