Brownism is bruised but unbowed

Remarkably, over six years, he has kept to a game plan on tax, borrowing and spending. Now, Brown wa

On 17 September, barring unexpected promotion or demotion, Gordon Brown will become the longest-serving postwar chancellor. If he lasts until July next year, he will overtake Lloyd George to become the most durable since Gladstone. Six years in, Brownism may be somewhat bruised, but, remarkably, it has retained its essence even in the harder times he faces now.

The strange ambition of Brown's chancellorship has been to limit, through pre-announced principles and decisions, his own annual room for manoeuvre in the three main areas of budget-making: tax, borrowing and spending (he has relinquished control of a fourth lever, monetary policy). The miracle is that the sums still, with a few sleights of hand, pretty much add up.

The strictest self-administered discipline has been on borrowing. Contrary to predictions, the Budget broke neither Brown's own golden rule of zero net borrowing over an economic cycle (except for investment) nor the European rule of not borrowing more than 3 per cent of GDP in any single year (including for investment). True, this has been achieved partly through optimistic projections of future growth alongside downward revisions of his prior assumptions of current growth. But even considerably more pessimistic growth assumptions than Brown has made are likely to do no more than nudge the limits of the borrowing disciplines rather than bust them dramatically.

On tax, things have been looking decidedly more flaky. The main constraint of not raising the basic rate of income tax has now been breached in all but name by the 1 per cent National Insurance charge on every taxpayer's entire taxable income.

Such adjustments, however, are as nothing compared with the remarkable achievement of sustaining untrimmed an unprecedented expansion of public spending on health, education and income transfers to poorer families and pensioners. Again, the strategy has been pre-announced, through the spending reviews and previous budgets, rather than depending on annual decisions. Simply to avoid the unravelling of such a strategy during the downturn (which could yet happen if an ailing world economy takes ours further down with it) would be a historic achievement.

Previous chancellors, especially Labour ones, have not come close to sticking to their game plan in this way. Three of them, Philip Snowden in 1929-31, Stafford Cripps in 1947-49 and Jim Callaghan in 1964-67, had strategies dominated by holding the line on sterling and faced humiliation when they had to devalue. Denis Healey in the 1970s was more consistent, but only because his plans for austerity were well entrenched even before he cut spending to keep the IMF happy; and this did not stave off humiliation at the hands of the unions, which failed to play ball with the other instrument of restraint, incomes policy.

Brown is a much luckier man than Healey and has only been able to bring off the hat-trick of containing borrowing and taxation while raising spending because he inherited an economy in which employment, inflation and growth were all going in the right direction. The present administration can justly claim credit for many policies that have helped maintain that state of health. But this Budget gave prominence to measures aimed at some of those enduring weaknesses in the British economy that could still make things go pear-shaped.

Perhaps the most important is the housing market. Brown rightly pointed out that its roller-coaster tendencies have been an important factor in the British stop-go syndrome that he wants to abolish. Brown announced that the government will look into the possibility of more fixed-interest mortgages, which would reduce volatility; and that it will further press local authorities to approve more land for housing, which would tackle the under-lying problem of shortages in supply. Alas, neither will stave off the more immediate and possibly disastrous prospects of a collapse in the ludicrously overinflated housing market of 2003.

Another weakness that it could take a generation to tackle properly is the imbalance in prosperity across the regions. Brown announced sensible ideas about encouraging public bodies to locate staff outside the south-east, and giving various forms of help to deprived areas. Perhaps the most welcome was an incentive to local councils to encourage new business in their areas, by allowing them to keep some of the receipts from business taxes.

Finally, an age-old British disease that has so far been only half-tackled is the inequality in people's skills and expectations. The government has provided incentives for work and helped people to find jobs, but it has not done much to help workers move on to better jobs and living standards. This Budget put considerably more emphasis on worker training, and reported some progress in raising Britain's relative productivity levels. It also introduced the new child trust fund, which aims to give future generations a small asset when they turn 18, partly in the hope that deprived young people, seeing that they do have a stake in society, will raise their ambitions. These measures are modest in relation to the huge weaknesses they are designed to address. But the emphasis of this Budget showed that Gordon Brown recognises that his legacy will depend on much more than the tax, spend and borrowing levers that he has manipulated with such aplomb.

12 issues for £12

Next Article