Of course, Westfield, a brand new and luxurious mall, is not representative of the overall economy. It has grabbed business from secondary and tertiary shopping areas, accelerating their structural and cyclical decline. There are dozens of retail areas across London and the Home Counties now in terminal decline, as consumer tastes change, the internet grows, supermarkets increase market share and people flock to newer, premium locations with good transport links.
But Westfield’s buoyancy does have a broader macro, cultural and political significance: people feel that the recession has come to an end, few understand the devastating fiscal tightening that is about to hit them and many are hoping for a return to business as usual. There will be a partial shift when pay cheques are hit – in some cases savagely – at the end of next month. But the full effect of the first wave of tax hikes – which start on 6 April – will not be felt until the following month and thus after the general election, expected on 6 May. The renewed slowdown in the housing market has also yet to register. All of this is good news for the government.
Yet while the public relaxes, problems are building up, not least that the UK is consuming too much and not producing enough. The Civitas think tank predicts the current account deficit will more than double from 2 per cent of GDP last year to 5 per cent in 2020. Britain’s imports of goods and services and payment of interest and dividends to foreigners would become much larger than the UK’s exports and receipts of payments from abroad. Reasons include growth in domestic spending; pricier imported food; and soaring energy imports as North Sea oil output falls by 7 per cent a year. Cutting a deficit of that size will cost jobs, argue the authors – Cambridge University economists Bob Rowthorn and Ken Coutts.
Shoppers are not the problem; there is nothing wrong with imports of Chinese clothes as long as UK plc is able to produce other things – including services such as finance, law or consultancy – to pay for them. Total free trade is the only way forward. But individuals must save enough – at least 10 per cent of their income – and reduce their debts to manageable levels. We also need a supply-side revolution that allows a new generation of entrepreneurs to build firms in high value added business services, finance, technology, education, the creative industries and high-tech manufacturing to export our way out of trouble. It will be a tall order – but one which the next government must place at the top of its to-do list.