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Friday 5 September 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

Inflation and interest rates would have continued to fall under any government after 1997, as they have in every other rich country; today the biggest threat to low rates is Brown’s public-spending spree and public sector recruitment binge, forcing the Bank of England to put up rates to keep the economy in check.

Brown’s related claim that ‘interest rates are at their lowest level for 35 years’ is equally wrong: as anybody who has a mortgage knows only too well, interest rates have been hiked five times in recent months; banks and building societies have followed suit. Rates did indeed hit a record low but that was more than two years ago; the City is forecasting that rates will soon be put up to 5 per cent, perhaps as early as 9 May.

The Chancellor’s claims that inflation is at its ‘lowest level for 30 years’ is even more breathtakingly wrong. Inflation on the retail price index measure was 2.6 per cent in the second quarter of 1997, having been tamed by Kenneth Clarke; today it is 3.2 per cent. The consumer price index is back up to a seven-year high. Then there are Gordon Brown’s claims about economic growth. He points out that Britain has grown for 51 consecutive quarters, which he claims is the longest period of sustained growth since records began in the year 1701. This is highly misleading stuff.

It is true that the economy has now grown for 51 consecutive quarters, but the first 19 and a half of these took place when first Norman Lamont and then Kenneth Clarke were chancellors; Brown was Chancellor for only 31 and a half of these quarters. In fact, the economy actually grew faster during the Tory period, when the compound rate of growth was 0.77 per cent a quarter, against 0.69 per cent during Brown’s period — despite constant and controversial adjustments over the past two years to the way the economy is measured which have helped Brown’s record. When looked at in annual terms, the British economy grew for 26 consecutive years between 1947 and 1973 — with a faster average growth rate, despite a few negative quarters.

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