Electorate sees through economic spin

Comment: The Government believes it has delivered a strong economy, yet people seem to be underwhelmed. Most electorates experiencing the feel-good effects of a robust economy tend to give more credit to their governments than we do. How do we explain this apparent paradox?

Although the economy is strong at present, most people realise that the administration (the Government plus the public sector) has little to do with this. The construction boom is driven by demographic factors and by immigration, and the attraction of US high-tech investment is a result of a low corporate tax rate which has been in existence for many years.

Interest rates are excessively low simply because of EMU membership - borrowing has never been so inexpensive or so readily available.

The administration can hardly take any credit for these developments.

There is a feeling among the electorate that there may be something artificial about the economy, which depends to such a large extent on a low tax regime for multinational industries and for offshore financial corporations.

Moreover, the period of high economic performance is over, and eaten bread is soon forgotten.

People are also aware of the vulnerabilities that are present, such as high indebtedness, loss of competitiveness and the possibility of a property bubble. They see that many new jobs are low-wage and low-productivity ones which may or may not be sustained.

Where the administration does intervene in the economy - in the provision of public goods such as infrastructure - it appears to find it difficult to secure value for money.

One reason for this is that there are few, if any, people in the administration who have the skills to assess projects properly using modern cost-benefit techniques.

Two effects flow from this into the public consciousness. The first is the belief that at some stage we will have to pay for these mistakes - presumably at a time when tax revenues are not as buoyant as they are at present.

The second is the growing perception that, if the administration finds it difficult to micromanage individual projects, it can hardly be expected to manage the economy as a whole.

The recent Budget is a case in point; its overall stance is inappropriate from a macro point of view.

Those of a more philosophical bent are aware that there is no coherent conceptual framework behind public policy. The dominant model would seem to be one of "liberal capitalism". There is an apparent belief in the functioning of markets. The benefits of low taxes, competition, privatisation and so on are often espoused.

On the other hand, however, senior policy figures have described themselves as socialists; some have advocated price controls, others have criticised firms for employing "cheap" labour. And of course there is almost universal endorsement of centralised pay bargaining.

This "eclectic" approach is seen as inconsistent and unhelpful not just to domestic decision-making but, more importantly, to the continued attraction of foreign investment. Influential visitors to our shores are finding it increasingly difficult to detect a consistent thread of economic reasoning.

Stealth taxation, which has worked for several years, has now become visible and is associated in the public mind with exploitation of consumers.

In a more general sense we are now seeing through the mirage of spin and PR. Once the spin genie is out of the bottle and visible to all, it is extremely hard to re-establish credibility.

Recent proposals about hiring skilled people into the civil service from the private sector, though welcome, may turn out to be another example of rhetoric. To implement this proposal properly would involve paying experts the same or more than senior officials of Government departments. For various reasons this is most unlikely to happen.

Another point to note here is the growing politicisation of the civil service, which means that in many important policy areas there is no source of truly independent advice.

In an administration that seems to prioritise PR, networking, routine administrative work, book-keeping as opposed to analysis, and over-reliance on consultants, real thinking is in short supply. If it comes to a choice between making a real improvement or giving the impression of making a real improvement, the latter will tend to win out - mainly because it is easier. We see the results of this cosmetic approach all around us.

The emphasis on corporate governance is another instance of form over substance. It gives the impression of well-run organisations but in fact masks serious weaknesses, especially the lack of analytical and problem-solving skills.

Examples abound where proper procedures are followed to the letter but somehow avoid real issues - whether they relate to tendering processes, personnel interviews, communications between different levels of management, or even the maintenance of good records.

The procedures are used in the main for optical reasons. Everyone tends to go by the book and tick the appropriate boxes. Resources are wasted in following procedures which are often used in such a way as to circumvent the very goals for which they were established.

A cynic might go further and contend that many procedures were designed and drawn up in such a way as to avoid tackling real issues while at the same time allowing one's tracks to be covered. The net result is growing bureaucracy, where priority is given to appearances and where the immediate drives out the important.

In conclusion, we are not dealing with a paradox at all. The electorate has ample reason for viewing the present strong economic performance with a jaundiced eye. People can see through the headline figures, the spin and the bureaucratic use of procedures, to the underlying realities. We should be glad that this is so; perceptiveness is our ultimate safeguard.

Mike Casey is the former chief economist and former assistant director general of the Central Bank.