No more lectures, please
The Prime Minister took the credit for the good economic times. Now people expect him to shoulder so
One of Gordon Brown's great strengths as chancellor was his international reputation. In his role as chairman of the International Monetary Fund's main policy committee, he was able to strut the global stage acting as Mister Fixit. When he called upon oil-exporting countries to open spigots to ease prices for crude oil, he was listened to. His calls for talks on open trade and his work with developing countries won him great plaudits.
Brown's global financial status also proved a useful tool in domestic policymaking. Those of us who listened carefully and analysed his decade of Budgets recognised the pattern. The good things which happened during his stewardship - low inflation and above-trend growth - were the result of Brown's policies. The bad things - such as the emerging markets crisis of 1997-98, the dotcom collapse of 2000-2001 and surging oil prices - came from overseas. He was fighting these battles on behalf of Britain in the lordly company of the Group of Seven richest countries and at the IMF and World Bank.
It all appeared to work brilliantly for Brown, who delighted during Budget statements in reading off long lists of data showing that his guardianship of the economy was far more brilliant than that of competitors on the Continent. Yet there was a flaw in his analysis which Brown, of all people, should have recognised. Britain as a trading nation is more exposed to globalisation than any G7 rival.
The low inflation that was the cornerstone of his economic record was as much a result of world events as of the assiduous monetary policy of the Bank of England. Like the rest of the world, the UK was a huge beneficiary of the Asian economic miracle. Cheap imports from China, India and south-east Asia led to deflation in prices of manufactured goods.
It was as much the sharp drop in the cost of clothing, footwear and manufactured goods as Brown's prudence which beat inflation. In the late 1990s, the main concern about oil was that the price had dropped below $20 a barrel and that this would lead to deflation - falling goods and asset prices. Oil at $135 a barrel was unimaginable.
Brown, not unreasonably, was willing to take the credit. When growth came close to falling off a precipice in 1998-99 after the emerging markets crisis, it was international conditions (not the foolishness of UK bankers overlending to the Asian tigers) that were the cause of the slowdown.
Now, as Prime Minister, Brown is at it again. He puts the surge in British inflation and the sharp slowdown in growth - with recession looming large - down to global conditions; it's nothing to do with new Labour's stewardship of the economy. Yet it was Labour which allowed the credit boom that resulted in the crunch and the run on Northern Rock. And it was Brown's administration that allowed the budget deficit to head north of £40bn a year, giving the Chancellor, Alistair Darling, little flexibility to provide help to the elderly or to the motorist, both hit by record fuel prices.
Brown's response to all of this has been that of the international financial diplomat rather than the politician. In Brown's world, blame for Britain's inflation and the pain at the pumps is laid at the door of the oil producers and the speculators. He promises to raise the matter with Saudi Arabia (which has shown little interest), and dusts off his old file calling for more transparency in the oil markets, where speculators have been enjoying a one-way bet. All of this is sensible. The Saudis clearly can step up production, even if it is not in their national interest. And tighter supervision of oil markets might squeeze the speculators.
But this has had little resonance with voters. They know it can now cost up to £70 to fill an estate car. They know that average fuel bills over the past year topped £1,000 and that there are further rises on the horizon. They know, too, that higher oil prices push up the cost of goods and services, including food. Into this vacuum of understanding step the Tories. We do not hear David Cameron or George Osborne wittering on about persuading the Saudis or getting the IMF involved.
As far as the consumer or voter is concerned, the rising cost of living in Britain is down to the government. "They" are the beneficiaries of the surging oil price (which pumps billions of extra pounds into the Exchequer), while the consumer is asked to take the pain by accepting pay increases held at 2 per cent in the public sector and beyond, when the increase in the real cost of living is heading towards double digits.
Blaming foreigners and calling on Opec to show restraint demonstrates how out of touch with ordinary voters Brown has become as Prime Minister. People are looking for direct assistance in their hour of need. The last thing they want is high-flown lectures about global supply conditions.
Alex Brummer is City editor of the Daily Mail
Tags: Economy 2008