What the rate cut tells us
Fraser Nelson 1:00pm
The Bank of England’s decision to cut interest rates is an acknowledgment that the UK economy is in a far worse condition that Gordon Brown makes out. It’s so important, because he’s getting away with murder. His skill was not in managing the economy well, but in making people believe it had been managed well. Here are some brief points.
What boom? People who say the economy has boomed under Labour tend to live in London. The OECD figures (table 1, excel file) show that most developed countries had better growth than the UK since 1997. Do they all have a Gordon Brown figure claiming credit? We’ve actually been the worst economic performer in the English-speaking world.
Outrageous deficit. At the top of the economic cycle we should have a Clinton-style surplus. But Brown's fiscal incontinence means we have the biggest deficit in Western Europe. The Italians and Greeks are living more within their means than us.Hideous inflationary pressures The market expects UK inflation to be a percentage point higher than any other G7 country (see FT today) over the next decade. So higher interest (and, ergo, mortgage) rates will ensure.
The “new jobs” myth. Brown said in PMQs yesterday that there have been 3m new jobs. It’s 2.7m, actually, of which most (1.5m) have been created by immigrants. Those on benefits has fallen from5.7m to 5.2m. Pathetic progress.
A disunited kingdom By shovelling the south’s wealth up north, Brown has created massive state dependency - what commentators have called a 'Soviet' north. A quarter of Liverpool, Middlesbrough, Glasgow (and a fifth of Manchester and Birmingham) are on out-of-work benefits. No wonder the UK economy is heading for a nosedive if so many of its engines are not working.
The Tories still don’t contest Brown’s boasts about economic success, saying they would not be believed. This may be rapidly changing. And the disconnect between the bungling Bank of England and real interest rates (or LIBOR) means today’s announcement may not be the relief which the 1.5m renewing their mortgages next year hope for.
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Comments
Steven Farrall
December 6th, 2007 2:25pmThis is exactly what I have been saying and proving for a very long time. Just why the opposition (of any colour) do not get on this case completely baffles me.
newmania
December 6th, 2007 3:25pmNow that was good .
Ray
December 6th, 2007 3:36pm.... And now the whole shaky edifice is about to come crashing down on Mr Bean's head. How Tony must be smiling as he swans about the Middle East, well out of the range of tumbling masonry.
Travis Bickle
December 6th, 2007 5:10pmToo many of Brown's friends in the media still believe he was an economic genius. Had any Conservative Chancellor sold our gold in a cut price garage sale or robbed our hard earned pension funds then it would be trumpeted loudly every day by Brown. Yep, 10 years of growth - continuing the growth from Conservative Government - but as pointed out we should be sitting on a nice cash surplus for the imminent rainy days ahead. Still we all know who will take the blame for that!
Roger Welsh
December 6th, 2007 5:17pmAs per Steven Farrall: I am equally baffled by the supine attitude of any parliamentary opposition. I can only guess that no one in the Palaces of Westminster has a clue what is going on. Talk about haystacks to hit!
David Lindsay
December 6th, 2007 5:38pmSteven, they'd have to be against "outrageous deficit", "fiscal incontinence" (and for what?), and the deliberate importation of a new and pliable working class Where is the evidence that they are? All the evidence is that they are not. Anyway, thank or blame George Bush's destruction of the dollar for the interest rate cut. But why are so preoccupied with house process, anyway? The explosion in house prices means that most younger middle or upper-working-class people stand no chance, if things stay as they are, of living out the middle-aged peak of their powers in properties remotely resembling the ones in which they grew up. "Bricks and mortar" do not, at least ordinarily, constitute an "investment". They constitute a place to live. Why do we care so much more for borrowers living on the never never than for the savers who make it possible for them to do so? We saw that when the Northern Rock crisis first erupted. The London media could not contain its scorn for the queues of "pensioners with tartan trolley bags in Northern towns". You live on their money, you know. But, of course, the only people still allowed to be politicians come from, and move in, exactly those same circles. And there is no law against interest-free mortgages. Does no one out there feel like making a mint by offering them?
Bill (Scotland)
December 6th, 2007 8:09pmI've been banging on about Brown's profligacy with our money for years; it's unfortunate that it's only now when the bill for these 10 years of economic mismanagement are coming in that most are beginning to waken up to the disaster that this man is responsible for and that Britain will be living with for years to come.
Tony Makara
December 6th, 2007 8:38pm3.6 Billion spent on the NewDeal and in spite of that youth unemployment is up by an incredible 20%. Those unemployed who are drafted into the compulsory 'Work Experience' part of the NewDeal receive their P45s and officially disappear from the unemployment figures, even though they are still receiving benefit plus an exploitative 15 pounds extra for doing a 30 hour week. So in reality the Labour government pays the NewDeal unemployed 50pence an hour. Lower than child labour rates in the third world. This 'Work experience' usually involves stacking shelves for supermarkets that donate to the Labour party. When we consider that those on the NewDeal disappear from the unemployment figures for 13-26 weeks a year,('Work Experience' comes around again and again), it makes us question just how high the unemployment figures really are?
Jessica, Merseyside
December 6th, 2007 8:45pmAbsolutley excellent article. If Fraser Nelson can present the case against Brown's economic record why can't the Conservatives? What is also scandalous is that Brown has taxed heavily upper working class and middle class earners whilst the poor are given expensive tax credits or benefits and the rich have exploited all the loopholes in order to pay as little as possible. Combine this with the explosion in stealth taxes brought in by Brown we should absolutely be running a 'Clinton style surplus' not a deficit. It leaves most people wondering where the hell the money has all gone as we do not have the world class health, education, transport etc services we were promised.
ChrisD
December 6th, 2007 9:21pmI would lay the blame for this myth firmly at the door of the media, you built him up, and in doing so gave Gordon Brown an almost mythical status as a Chancellor. His *dodgy* facts and figures have lain unchallenged by the editors of many a newspaper.
The Conservatives and the Libdems particularly Vince Cable have been warning of the problems for building up for years, but then you get some nice journalist or BBC reporter who comes along and tells you that everything has been fine.
Edward
December 7th, 2007 11:23amTo say that Brown has shovelled money"up North" may be true for all I know.However if so the shovelling has been done for the benefit of those who do not work for one reason or another(except pensioners). If money has been shovelled then it has not been shovelled into those parts of the North's economy that will provide economic development.Take transport for example.Money for that is shovelled into London (£16 billion recently plus £800 million for St Pancras). Meanwhile,Leeds can go whistle for a new tramway system and local railm links are getting worse by the day. So it is government business as usual i.e never using money to its best advantage to create new wealth.
David Lindsay
December 7th, 2007 4:46pmSorry, that should of course have read "fixed interest", not "interest-free"! And no one here "Up North" has noticed much, if any, benefit of this "shovelling". Mention the 10 years of a County Durham MP as PM and the very best you could expect would be very hollow laughter indeed. Still, it's good to see people on here finally admitting that the Tories don't actually disagree with the Government about anything.
John Moss
December 8th, 2007 9:04pmThe 83 employment act made relatively few changes, but it stopped people relying on others to get them out of the mess they'd made. They stopped behaving badly and the rest ... as they say. If Cameron does what he says in Welfare and enacts Wisconsin style time-limited benefits, he could have the same effect, namely, changing the way people behave. If they linked it to a freeze in the value of the Minimum Wage - which has had above-inflation increases all its life - and an end to the rights of immigrants to access free healthcare and state schooling until they'd paid a wodge of tax, they might just achieve a similar sort of paradigm shift. Here's hoping so anyway. Brown will never do it as he's completely in hock to the unions.