In the years of feast it is wise to prepare for famine
?NO return to boom and Bust under Labour? became the mantra of Tony Blair and Gordon Brown from 1997 onwards. This was somewhat hypocritical as the ?bust? they were referring to was Britain?s exit from the European Exchange Rate Mechanism in September 1992 conveniently forgetting that it was Gordon Brown, when in Opposition, who encouraged the Conservative Government to enter the mechanism in the first place.
Yet since that event, with the pound free to float, the economy boomed. By 1997, the new Labour Government was able to inherit what economists now call the ?golden legacy? of five year?s sustained growth and sound finances. Fuelled by cheap products from China keeping world inflation and interest rates low, our economy has continued to expand over the last 10 years – though not as fast as increased Labour spending. Any weaknesses in the British economy have, up until now, been masked by the buoyant state of the world economy.
The question now being asked by economists is ?Is Britain ready to face a world economic slow down?? The OECD is not optimistic. They say that the difficulties are ?going to be larger in the UK than elsewhere?.
But the jury is still out on whether Britain?s economy will face a crash. I hope it will not. But what is clear is that after 15 years of global growth, while most developed nations have healthy finances, Britain does not. Both the OECD and the European Union estimate that Britain suffers from the largest structural budget deficit of any developed nation as a percentage of GDP and is more than twice the size of the European average. The Government?s net borrowing is now running at its highest ever level for December and the net borrowing in the financial year to December 2007 is running at ?43.6 billion.
Over the last five years, Gordon Brown has borrowed over a ?100 billion more than even he originally projected. It is a myth, well promoted by New Labour?s press office, that Gordon Brown was a great Chancellor. My sympathy goes out to Alistair Darling who inherits a set of books scored heavily in red.
The Pharaohs in ancient Egypt were advised by Joseph, of Amazing Technicolor Dreamcoat fame, that in years of feast it is wise to prepare for famine. Other nations have done so. We have not. It was hubris in the extreme to chant ?no return to boom and bust under Labour?. Such economic cycles have been recognised for hundreds of years, but can be mitigated by foresight. The biggest fool is one who believes his own rhetoric.
And now that Gordon Brown is Prime Minister, major doubts are currently being cast ? even by his own back-benchers ? on his ability to perform this r?le.
At first, Gordon Brown wanted to mark a change in the character of Government by moving away from the cult of personality. He succeeded. The contrast in personality between him and Tony Blair could not be more marked.
But it is not his charisma, or lack of it, that worries Labour MPs. It is his seeming inability to make decisions. Should he not have acted as soon as Peter Hain announced he had not met his obligations over declarations of donations because he was too busy being a minister? Gordon Brown dithered over calling a General Election, was panicked over inheritance tax, hesitated over Northern Rock, and then came the news that the much vaunted new Capital Gains Tax would be modified after all.
Has Gordon Brown lost any grip on Government he ever had?