BLINDED BY HIS OWN CLEVERNESS
Gordon Brown interprets the economic world as he would like it to be, not
as it is, says Bruce Anderson
GORDON Brown is in an enviable position. Inflation is under control, unemployment is so low that is has ceased to be an issue, the public finances are in surplus, the economy has been growing for the past nine years — and the politics is as roseate as the economics. No Chancellor has approached a pre-election Budget with as much freedom of manoeuvre and so many opportunities to please the voters. No Chancellor has ever built such a formidable, indeed primeministerial, reputation so exclusively on the basis of his predecessors' achievements.
This article was written before Mr Brown delivered his Budget, but that is not as much of a disadvantage as it might have been. It is not necessary to know the narrow details of the fiscal arithmetic to make confident predictions both about the Budget's content, and its consequences.
We can be certain that Mr Brown will try to persuade the voters that he is the onlie begetter of the nation's prosperity; there will be plenty of references to 'boom and bust'. Politically, this has worked and will no doubt continue to do so, although it is flatly untrue. Mr Brown has been successful only insofar as he has maintained continuity with John Major, Norman Lamont and Kenneth Clarke. It was their monetary and fiscal policies, wrought in adversity, which made possible the successes of the recent, easier years. Mr Brown's sole contribution was to grant the Bank of England its independence, but by 1997 that was an idea whose time had come. By then, the crucial change in British economic culture had already occurred. After 25 years in which inflation had seemed inevitable, it had become unacceptable. Mr Brown's independent Bank merely ratified the Major government's achievements.
But Mr Brown has not been a passive steward. He has introduced significant policy changes, which all have one point in common. They are changes for the worse; they undermine the long-term growth potential of the British economy.
There is a simple explanation for this; Gordon Brown suffers from the classic deformation professionelle of the intellectual in politics. He combines impregnable selfconfidence with an equally impregnable determination to interpret the world as he would like it to be, not as it is. This perverts his entire approach to business, and to the labour market.
Initially, he seemed to have the right instincts. He not only identified the problem: productivity. He also went to the best available textbook: the American economy. He enjoys crossing the Atlantic and proclaims his admiration for most things American. But he does not understand the American economy. The problem arises from the intellectual's belief that truth is always complex. Mr Brown is blinded by his own cleverness. He cannot see that there is a simple explanation for the USA's successes: the unwritten first item of the American Bill of Rights, that every American shall have the right to work his butt off, and keep a large proportion of the proceeds'.
Governments do have a crucial role to play in that process: a negative one. They must curb their appetite for taxpayers' money, while eschewing measures that would create inflation and resisting the temptation to interfere in the labour market. The rest they can leave to the people.
But Mr Brown is temperamentally incapable of such laisser-faire. He is convinced that he can legislate and regulate the UK into higher productivity. In pursuit of this fantasy, he had added hundreds of pages to Tolley's tax manual, even before Wednesday afternoon, with its further strata of complexity. Since 1997, this government has also been responsible for about 3,000 new regulations which affect the labour market. The Chancellor does not realise that you do not create jobs by deterring job creators; you do not encourage small businessmen by enriching their accountants.
Those Thatcherite dicta remain true, even though there is no current shortage of jobs or small businesses. But when times are good and growth is strong, it is impossible to judge an economy's ability to bear burdens. Strong growth never lasts for ever, and when the next downturn occurs, the British economy's ability to cope will have been weakened by Gordon Brown. His reregulation of the Labour market will have lessened the impact of the 1980s' supplyside reforms. Because of those Thatcherite measures, employment levels recovered with unprecedented rapidity after the last recession, ten years ago. Because of Mr Brown, any future recovery will take longer.
He has also increased the tax burden. Even though the social objectives which they are intended to fund may seem desirable, higher taxes always divert resources from the more productive sectors of the economy to the less productive ones. Equally, the tax-funded public sector is still unable to spend its money with anything like private-sector efficiency. Large additional sums will not remedy that defect.
Mr Brown has also created two further post-dated tax-and-spend difficulties. The revenue which he has raised from his 45 stealth taxes is considerable: £36 billion over the course of the Parliament. Most of it is also volatile. Much of it comes from the corporate sector, and in any period of economic weakness, corporate tax receipts always decline sharply. But Mr Brown has locked the public sector into higher spending levels, on the assumption that the money will continue to roll in. In particular, he has extended means-tested benefits, to the extent that almost half the population are entitled to them. This means, however, that the next time the welfare budget comes under pressure because of economic frailty, there will be dire consequences for the borrowing requirement. In any recession tax receipts always fall faster than expected, while welfare costs rise faster. Mr Brown has ensured that it will be even worse next time.
On Wednesday morning, it seemed likely that the Chancellor would find some headline-grabbing method of reducing taxes. But the net benefit to the taxpayer is unlikely to equal even one tenth of Mr Brown's stealth-gotten gains. If Gordon Brown is a tax-cutting Chancellor, a burglar who abandons some of his swag has made a charitable donation to its owners. But it is depressingly easy to bribe British voters with their own money.
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