Jacob Rees-Mogg: Supply reforms would help continue economic recovery
The latest growth figure for the UK economy is encouraging. Although 0.8 pre cent does not sound a great deal it annualises at 3.2 per cent which is about the highest rate at which the economy can grow without risking inflation. It also equates to £12 billion for one quarter or £48 billion for a whole year.
It has been achieved on this occasion through a broadly based recovery with services and manufacturing both doing well. Construction was up by 2.5 per cent for the period but is still 12.5 per cent off its pre-recession peak. This is good news as this downturn has seen unemployment rise and less proportionately to the economic decline than during previous ones.
This has been in part because of companies' expectations of a recovery which encouraged them to hoard and could not have gone on indefinitely. Labour market flexibility from Margaret Thatcher's reforms, including the much maligned zero hour contracts, have contributed to helping people keep their jobs.
However, the supply side revolution is now 25 years old. The policies which swept away regulation and reduced union power transformed the nation's global competitiveness and prosperity. Unfortunately, in the boom years and through the European single market these reforms have been undermined leading to increasing regulation and inflexibility in the market.
In response to the economic crisis the Government has focused on restoring fiscal stability so that the country, like a prudent household, lives well within its means. It has not yet turned sufficiently towards promoting a dynamic market. It has rightly been more concerned, through a loose monetary policy, with maintaining demand.
Now is the time, to continue the recovery, to release the animal instincts of competition through further supply side reforms.