Gordon Brown should beware the shade of Greenspan

Fraser Nelson

The Prime Minister has successfully massaged the public’s perception of his role in
the current crisis. But he may not get away with it forever.

High grocery, fuel and petrol prices can be described as the same phenomenon although they have separate roots and are all exacerbated by the plunge in sterling.

It is fashionable to denounce Mr Brown for having dismal presentational skills. But consider this. Since last August there has been a 12 per cent fall in the effective rate of sterling against a basket of world currencies. As the Bank of England’s chief economist put this in April, this is ‘of the same order as the depreciation after our exit from the Exchange Rate Mechanism back in September 1992’. And aside from some grumbling about the price of Spanish holidays, there is minimal political fallout.

Mr Brown has played down the surge in repossessions, telling the House of Commons there were just 27,000 last year against 200,000 in the worst two years of the 1990s. This is true, but repossession orders stood at 95,000 last year against 103,000 in 1990 and such orders take time to process. The spectacle of property auctions and flats being sold for half their purchase value is not yet on Britain’s television news, as it is in America. But this, we must deduce, will not take long.

The Prime Minister is lucky that the Conservatives are not making the above points. David Cameron operates within parameters which Brown, in effect, has set. The Tories talk about ‘investment’ rather than spending. They accept that a tax cut will represent a straight loss to the Treasury. As one Cabinet member recently put it to me: ‘They use our words; play by our rules. This means we’ve got them over the economy, and they don’t even realise it.’ Mr Brown has brilliantly attached the Tories to a short leash, so they cannot get the distance they need to attack him.

It marks a sorry contrast from the United States, where a wide range of solutions are being put forward. Hillary Clinton proposes a $70 billion state spending stimulus. Barack Obama favours a $250 billion tax cut for the low paid. John McCain wants to cut corporation tax from 35 per cent to 25 per cent and talks of the ‘philosophical difference’ between him and his rivals in the Democratic Party. If one cuts the tax rate, the Treasury hauls in more money in the long run because people will be better-incentivised to earn.

The lack of such debate in Britain is testimony to the extent to which Mr Brown has won the argument. His foes may have great fun jeering at his spectacular own goals, but they do not propose a different way. Which is all the more surprising, given that Mr Brown’s way has led Britain to nationalise a £110 billion bank and to the start of what the International Monetary Fund believes is a 30 per cent crash in house prices. For this reason, it is quite possible the Conservatives will fail to take him to task.