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Saturday 17 May 2008

Cover Story

Why we can’t afford a third term

Allister Heath shows how Gordon Brown has played fast and loose with the facts to portray Britain as a dynamic economy. The truth is that the Chancellor is a tax-and-spender who has laid up huge problems for the future

It may seem churlish to take issue with the great claims made by and for Gordon Brown. But it seems likely that in due course Brown will be marked down not as one of the greatest but instead as one of the most destructive chancellors in British history. His achievements over the past eight years have been greatly exaggerated, and the future looks full of menace. Gordon Brown is characteristically New Labour: he has brilliantly constructed his own reputation by playing fast and loose with the facts while gradually draining the British economy of its dynamism with a flood of red tape and tax hikes.

The Treasury sometimes seems to have modelled itself on the Ministry of Truth in Orwell’s Nineteen Eighty-Four: the past has been erased, history rewritten to ensure that 1997 has become the year zero and the Tory years portrayed as a dark age of recession, inflation, unemployment and poverty. With the copious use of selective, always misleading and sometimes downright erroneous figures, Brown’s successes have been greatly exaggerated while his failures have been camouflaged in the statistical fog.

When Brown was given the keys to No. 11 Downing Street, he was bequeathed two crucial reforms. The first was the supply-side, microeconomic revolution of the 1980s, when the economy was privatised, reformed and deregulated; the second was the macroeconomic changes of the post-Exchange Rate Mechanism (ERM) era, which laid the foundations for the current low inflation and low interest rates that were subsequently entrenched by Brown’s sensible decision to grant the Bank of England its independence. That is why, when he became Chancellor, Brown was told by Treasury officials that the economic figures were ‘fantastically good’ and ‘much better than predicted’.

Since then, under Brown, economic and productivity growth have slowed, the trade deficit has exploded, the decline of manufacturing accelerated, the fiscal situation has started to deteriorate again, international competitiveness has fallen, savings have collapsed and Britain is facing a long-term pensions crisis. Most of what is good with the British economy today is due to the Tory reforms of the 1980s and 1990s; almost all the economic problems the country will face by the end of the decade will have been caused by Brown’s mismanagement.

In their election literature across the country, Labour candidates have parroted Brown’s claims that interest rates have halved under the current government, with the implicit threat that they would double under the Tories. The truth is that interest rates are now barely a quarter lower than when the Tories were last in office. Thanks to the new era of stability ushered in after Britain’s departure from the ERM in 1992, interest rates had fallen to 6.25 per cent in the spring of 1997; today they are at 4.75 per cent and going up.

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