Economic policy is still the most important and contentious area of British politics. The arguments about who controls the economy and the causes of economic failures are central to current political divisions.
There are a number of distinguishing features to the policy-making process. Continuity is dominant, change is only gradual because most government commitments are entered into in the past and the process is incremental. There are also many factors that are beyond government control. These distinguishing features mean that there is actually very little freedom for the government to make choices. Some marginal influence can be exercised especially if in government for a long time and the influences can be quite substantial. The most important being party ideology and electoral considerations such as increasing public spending as an election approaches.
In the constitutional democracy of the UK, the control of policy is firstly in people-elected representatives. More critical accounts look at other influences in parts of the civil service and powerful organised groups in the wider economy. There is a theory that the dominant 'Treasury elite' control policy-making because they are well placed, Treasury concerns dominate and because the Treasury is allied to the financial interests of the City of London and its international interests. Arguments against the theory are that the Treasury usually only advises, its long history of lost battles and because no single Treasury view exists.
The 'veto group' theory emphasises the interconnectedness of the making and implementation of policy. As Britain is a market economy the co-operation of the institutions that make up a market economy are necessary for policy to work effectively. There is some debate as to which groups have the power of veto over government policy.
Business, it is often stressed, is a powerful enough group to be a veto group. The rules of the market place give businesses capacity to help or obstruct policies. Many of the long term aims of government policy such as jobs, investment and productivity, all depend on a market economy and decisions taken by business leaders. All economic policy is at the mercy of business and profits play a large part in the decision making process. If an important decision-maker is not convinced that a policy is right, the 'veto' may be used by witholding support for the policy. The ownership of capital is key to understanding the conduct of economic policy in Britain. Another key element is labour. Labour, especially in the form of unions, is another important 'veto' group perhaps more important than capital. It is in a position to prevent the introduction and implementation of policy and has the power of the threat of strike action to 'veto' policy.
The market place is the chief mechanism for producing goods and services in a capitalist economy. Failure to produce goods and services in sufficient amounts is market failure. There may be too much of one thing and not enough of another. Market failure is one of the most important areas for state intervention. Health and education are the two most obvious cases where government intervention is necessary to prevent gaps appearing in service provision. Welfare provision is also seen as a burden on the economy. 'Thatcherism' has been judged by its critics to have been merely deindustrialisation and a shift away from consensual policy style to the deliberate strategy of self-interest of the rich and enterprising for increasing their wealth while endangering peace and harmony.
Recent economic indicators show that Britain is officially in recession. They show that the idea of unregulated markets is in serious trouble. Shares in some of the big banks have plummeted. Employment prospects are predicted to worsen as demand dries up. Output and orders are falling in manufacturing, there has been a downturn in the service sector, shoppers have been spending less, profitability and prospects in the financial sector have also been falling. Some large industrial business have temporarily shutdown and some have introduced shorter working times. Unemployment is up. Interest rates are at an all time low of 1.5. The future picture is pretty gloomy and some are agreeing that it could be up to 40 years before things get back to 'normal'. If this recession is like other recent recessions it will not be nearly that long or anything like it. The opposition parties are making of it what they can mainly in blaming the government. The 'Buy British' campaign will work if people take up they idea.
There is some resentment against governments and banks around the world for not passing on the billions given them by governments, for giving such large sums to those perceived to be the cause of the problem while neglecting what are considered worthier causes.
There are opportunties for people. Good ideas work under any economic conditions. Financial innovations may be particularly helpful. The government is doing what it can to help but jobs need to be created as they are being in the retail sector. The downturn has global dimensions. Globalisation usually takes economic forms, a degree of political globalisation might help with the current problems (Jones, Gray, Kavanagh, Moran, Norton and Seldon, 1998; Parkin, Powell and Matthews, 1997).
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