On slippery slopes

We spent new year's eve skiing with friends - although not in the French Alps. These days we can ski near our home in Castleford - and the snow is perfect.

Skiing in Castleford! Ten years ago, nobody would have believed it possible. But it is easy to see why Xscape chose us for their second indoor ski centre, on the Glasshoughton pit site. We have a supportive council and good road and rail links with Manchester, Newcastle, Birmingham and Leeds, so we're a comfortable day trip for families living in the North.

It is a remarkable transformation. Fifty years ago, more than 3000 men worked underground in one of Britain's largest pits. Fifteen years ago, unemployment was high and the land was derelict. Today there are more people employed above ground on the site than were previously employed below.

Last year when I met Xscape's chief executive, PY Gerbeau, I learned a lesson about local regeneration. He told me his executive colleagues spent years deciding whether to risk opening a national ski centre in Castleford. Why did Xscape wait so long? And what finally made up their minds? Gerbeau replied with one word: "stability".

The instability of the 1980s and early 1990s undermined the willingness of British companies to invest in new and risky projects. Fifteen years on, British companies and families are starting to believe that stability may be here to stay.

Not that you would always believe it from reading the newspapers. The longer the UK has sustained low inflation, low interest rates and rising employment, the more some commentators are convinced it must all end in tears - just as it always has before. So far the pessimists have been wrong. Last year was tough, with high oil prices, weak growth in the eurozone and a slowdown in the UK housing market. But although dear oil caused inflation and recession in the 1970s, this time the UK has continued to grow - and faster than our European partners.

Nor has the housing market crash materialised. On every previous occasion, double-digit growth in house prices has been followed by double-digit inflation and interest rates. And 18 months ago many commentators were again predicting a housing slump. Instead, the latest signs are that prices and activity are strengthening and it looks like we have just witnessed the most benign and best-managed housing market slowdown of my lifetime. And the credit should go to the Bank of England for its early and decisive action to raise interest rates.

We’ve just witnessed the most benign and best managed housing market slowdown of my lifetime

Before 1997, there was a tendency to play politics with monetary policy. Rates were often cut on Budget day regardless of the needs of the economy. Now the Monetary Policy Committee can take a much more forward-looking and aggressive approach to interest rates than politicians ever could. Think of the way the MPC cut interest rates when world financial markets went into a tailspin in 1998, or the nine cuts after the US slowdown, which, backed by fiscal policy, averted a recession.

Then imagine if a chancellor had embarked on a similar series of consecutive monthly cuts. After the second, the press would be shouting "panic" and the old 1970s newsreels would have been dusted off.

By the third cut, a political crisis - and probably a sterling crisis - would have been under way.

No wonder that, before 1997, the temptation for chancellors and prime ministers was to delay difficult decisions in the hope that something would turn up. But it was this delay that led to inflation, sharp rises in interest rates to control it, then sharper cuts to try to stave off recession.

We can't insulate the British economy from the global economy or the housing market. As the governor of the Bank of England said recently, we have to remain vigilant of global imbalances and domestic risks. But as we start 2006, I believe there are reasons to be optimistic. With our forward-looking Bank of England and our fiscal rules, we can steer a more stable course for the economy than ever in the past. If only I was as confident about the stability of my skiing - although at least I don't have so far to go to practise.