UK's Year of "Hard Truths"; More Austerity for UK; London Taxi Wars
LAKE: 2014 will be the year of hard truths. That's according to UK chancellor George Osborne in his latest speech. Budget cuts are in and the welfare state faces yet another squeeze. His gloomy prediction comes despite new numbers which show business confidence is at a 20-year high. It's not the only bit of encouraging news. Britain's service sector maintained a yearlong surge in output in December. The pace of growth outstripped the euro zone average and especially France. Unemployment is falling. The UK's jobless rate is now 7.4 percent. That's the lowest since 2009. However, international borrowing costs remain high. The yield on the ten- year bond is just under 3 percent. Chancellor Osborne says it is not yet time to loosen up on austerity.</s>GEORGE OSBORNE, UK CHANCELLOR OF THE EXCHEQUER: For the first time in a long time, there's a real sense that Britain is on the rise. Jobs are being created, the deficit is coming down. And that brings its own risks. As we start the new year, I want to warn you about a dangerous new complacency around in our politics at the moment. You hear some of my political opponents talking as if the hard part of the job is done and we can go back to the old habits.</s>LAKE: James Sproule is chief economist at the Institute of Directors. He joins me from London. James, this is very foreign to me. I'm in a country where politicians talk up the economy no matter what's actually going on. Why so gloomy?</s>JAMES SPROULE, CHIEF ECONOMIST, INSTITUTE OF DIRECTION: I don't actually think he is being gloomy. I think he's actually telling the British people some home truths here. What we've had in the UK was sort of the whole period of the 2000s under Gordon Brown as chancellor was a real expansion of government spending, and at a time when any Keynesian should have been realizing it was time to be putting some money aside, the UK government ran huge, huge deficits, and therefore huge debts. And it's come time to realize we have to live within our means. And there's no better time to start living within your means than when the economy itself is expanding. So, I think that one of the things looking back over the last few years that George -- the conservatives didn't do is they didn't prepare the ground all that well when they were in opposition, to saying to people, look, we are overspending. Brown's expansion of the public sector is not sustainable. So now, they're sort of correcting for that, and they're coming out and they're saying things like it's going to be tough times, we've put through the tax rises bit. We've now got to carry through the spending cuts bit. That's going to be difficult, particularly given there's a coalition government. But the fact is, we still have to do the right thing for the longer term, and the right thing for the longer term is to lower those taxes, and in order to get lower taxes, the first thing you've got to do is eliminate the really chronic deficit. At one point, we touched ten percent of GDP, it was absolute appalling, and --</s>LAKE: Well, I'll give you that --</s>SPROULE: -- this is really part of that stage.</s>LAKE: Yes, I understand what you're saying, and I'll give you that, but we are at a time where we're coming out of an incredibly hard, damaging, painful financial crisis, global crisis, that really hurt the psyche of not only investors, of consumers. Isn't there a concern that sort of talking so much about austerity and saying it's not a time for complacency will actually hurt the confidence that's finally come back?</s>SPROULE: I don't think so. We just completed a survey at the Institute of Directors where we asked people, what do you think is going to happen to UK GDP? What's going to be happening to your revenues? And we had substantial -- like three quarters of our respondents saying that they were expecting to expand revenues in the next year. So, I think the consumer is feeling pretty good. And what we've seen in the UK so far has been -- if you look at where the recovery is coming, it's largely consumer spending. Now, the challenge, really, for the next year is to have that narrowly- based economic recovery expanded to a variety of other sectors. So, for instance, business investment, which is still lagging a bit, and UK exports, which have not been as good as anybody would have hoped. So, I think that at the moment, what we need to be doing is expanding that. As far as what the chancellor should be really looking for in the longer term, it's to be setting a business agenda that gives business the confidence to do the investment which will lead to that broader-based growth out in the future.</s>LAKE: All right, interesting insight. James Sproule, chief economist for the Institute of Directors, thank you so much for clarifying that message for us. Japan's Nissan is fighting for a foothold in London's taxi market. It has redesigned a vehicle to rival the city's traditional black cab. Nina Dos Santos brings us this report.</s>NINA DOS SANTOS, CNN INTERNATIONAL CORRESPONDENT (voice-over): From the horse-drawn carriages of the 1900s to the motorized models of today, the changing face of Britain's capital has been reflected in its jaunty taxis. And now, London's iconic black cab is about to receive another facelift, courtesy of Nissan.</s>ANDY PALMER, CHIEF PLANNING OFFICER, NISSAN: What we've tried to create here is an iconic vehicle for an iconic city. If you want to create those icons, then you've got to be -- you've really got to be dedicated to doing it properly. And if we were going to do this, we needed to make the bowler hat for the city of London.</s>DOS SANTOS: The Japanese offering hits the road later this year. Nissan, along with Mercedes Benz, has moved into compete against the current maker, Manganese Bronze, now owned by China's Geely Automotive.</s>PALMER: We've taken a base vehicle, which is the NV200, but in each case, tried to redesign it in a way that is sympathetic to the particular cities that we're going.</s>DOS SANTOS: One spoke in the wheel, London's quirky transport laws.</s>STEVE MACNAMARA, GENERAL SECRETARY, LICENSED TAXI DRIVERS' ASSOCIATION: The rules on taxis in London, the Hackney Carriage Acts, go back to -- wait for it -- 1834. Basically, the motor vehicle has had to fit into that horse- drawn era, which is why vehicles are so high. One of the key things is a gentleman of 5 foot 8 has to be able to sit in the back seat wearing a top hat.</s>DOS SANTOS (on camera): Adapting a vehicle like this for the streets of London has been a yearlong process for Nissan. For instance, this taxi has a mandatory circle of some 25 feet. The front headlamps, the grill, and the taxi sign, have all had to be specifically redesigned to match the look and feel of the capital's existing fleet. Would you change one of these for that cab?</s>MIKE FITZPATRICK, TAXI DRIVER: Well, unfortunately, this has only got about two years left in it, and once that's happened, then yes, I probably would look at the Nissan.</s>DOS SANTOS (voice-over): The changes in Nissan's model are more than just aesthetic. The company aims to offer an emissions-free vehicle by 2015, in line with London's goal to eradicate polluting taxis from its city center by the decade's end. So, while one of London's best-loved sights might be about to change, it's worth remember, not all of the capital's black cabs are actually that color. Nina Dos Santos, CNN, London.</s>LAKE: Well, Atlanta today is colder than Alaska, if you can believe it, and Memphis is colder than Moscow. There is some brutal weather in the United States, and it's headed this way. We'll have an update next.