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Cover Story

Why we can’t afford a third term

Allister Heath

Saturday, 30th April 2005

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

Apart from the huge increase in public spending, much of it debt-financed, there are other, equally unhealthy reasons why the economy appears to have done well. The British stopped saving and went on a spending spree: the savings ratio has collapsed from 9.7 per cent of income in the spring of 1997 to 5.6 per cent last year. Together with Brown’s raid on private pensions when he abolished their tax advantage, this ensures that Britain is on course for a long-term pensions and savings crisis. So far, the government has refused to say how it will tackle this; we await the results of the Adair Turner commission into pensions after the election. The issue will become explosive in a third Labour term.

Because Brown’s economic growth predictions at his 2004 Budget turned out to be right, he is now basking in a wholly undeserved reputation for being an unrivalled forecaster. All Brown’s carefully cultivated Fleet Street supporters, especially the Daily Mail and the Sun, have bought this hook, line and sinker: it is a pity that none of their commentators can be bothered to trawl through past Budgets, for they would discover that Brown has been taking them all for a ride. In fact, the Chancellor grossly and repeatedly overpredicted growth for 2001, 2002 and 2003, eventually being forced into humiliating downgrades which he characteristically managed to present as triumphs. For this year, few in the City expect his 3 per cent to 3.5 per cent forecast to be right: they think that a maximum of 2.7 per cent is more likely.

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