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.
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.