The Spectator

Red alert on Brown

After years of sucking up to Gordon the markets are beginning to lose confidence in Labour

It is an iron rule of politics that the more ecstatic the immediate reviews of a Budget, the more disastrous it is likely to prove for the country over the long term. Last week’s effort by Gordon Brown may yet prove to be in the grand tradition of Denis Healey’s 1975 performance — which was instantly popular, but ended with Britain begging for alms from the IMF. If you want evidence of the Budget’s ephemeral magic, it is there in the opinion polls. After weeks of closing the gap, the Tories appear to have sunk back to an eight-point deficit, according to a Guardian/ICM poll. After months in which the press have teased Gordon about his dwindling role — and his mysterious trips to China and Africa — he is back there at the centre of events, controlling the Labour narrative, steering his party, it seems, to an inevitable third term. In all the hosannas, it has been easy to miss the cheep of the canary in the mineshaft.

The warning of an impending cave-in has been sounded in the City, where governments have borrowed since the days of William and Mary, and where previous Labour governments have come so catastrophically adrift. The statistic in question is the yield on long-term gilts: the interest rate charged by the moneymen to the British government on the enormous loans which, for instance, allow Gordon to watercannon our money at the NHS and employ another 850,000 public sector workers. This yield is a good indicator of the City’s confidence in the nation’s financial position, and in the last month it has risen from 4.3 to 4.8 per cent. The City, in other words, is taking fright. After years of sucking up to Gordon, and pretending to be enthusiasts for the Third Way, it appears that the markets are beginning to lose confidence in Labour, and are therefore charging more.

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