POLITICS
The dangers of crossing gypsy Gordon's palm
BRUCE ANDERSON
0 n Tuesday, Gordon Brown exuded confidence; rarely in the past ten years has any chancellor sounded so bullish. On the basis of his remarks, no one in Britain has anything to worry about, least of all the Labour party officials planning the next election campaign. But there is one little difficulty. Mr Brown appears to believe Britain can prosper in a vacuum, irrespec- tive of world economic conditions.
It may be that the prospects for the world economy are better than most observers believe. There could be a renewed bull market in America, while Japanese con- sumers decide to spend money again and Russia avoids a political crisis. But it would be prudent to plan on somewhat less opti- mistic assumptions. Mr Brown's forecasts cannot be vindicated unless the USA, Japan and Russia all confound the pes- simists. Yet this seems unlikely, and there is a further ground for anxiety: the euro.
For some time, free-market Europhiles such as Leon Brittan have been arguing that the euro will encourage supply-side reform and labour market deregulation throughout the continent. They ought to be right, and in the long-term, they will have to be, if the euro is to survive. But in the short-term, Messrs Jospin, Lafontaine and Schroder seem to have other ideas, so there are grounds for alarm.
Most European governments and busi- nessmen have not yet grasped the scale of the challenges and disruption which the euro will involve; the colossal problems involved in running a single monetary poli- cy for half of Europe. It is more and more apparent that the euro was a political vision which has not yet been grounded in eco- nomic reality. Yet in a few weeks' time, it will be a reality. There is a risk that the resulting interest-rate regime will suit abso- lutely no one, being too lax for the strong economies and too restrictive for the weak- er ones, thus generating, simultaneously, both unemployment and inflation. If this happens, there will be little growth in Europe. As long as we remained outside the euro, the UK would avoid the worst of the damage, but as our principal export markets would be suffering, so would Britain's growth prospects.
Yet the Chancellor claims that in little over a year's time, the British economy will bounce back from a mild decline and return to steady growth at historically high levels. There is no reason to believe him; every reason to question his grasp on reality. After all, and despite his exuberant tone, he was also admitting that the growth forecasts he had made less than six months ago were now inoperative. As he had been unable to predict what would happen next year, why should we take any notice of his forecasts for the year 2000 and the year after that?
Given the uncertain state of the world and the large number of variables involved, long-term economic forecasting has rarely been more hazardous. Yet the Chancellor was purporting to deal in quarter per cents. That is not economics; it is astrology. But there is a difference between Chancellor Brown and a fairground gypsy. She merely requires her palm to be crossed with silver; there are many billions riding on Mr Brown's predictions. Despite past mistakes, and unlike his rival Robin Cook, Mr Brown has not yet lost his reputation for compe- tence. But it is now at the mercy of an enor- mous gamble.
Other parts of the government machine have also proved to be fallible. In its han- dling of the Ron Davies affair, No. 10 was guilty of a basic failure of spin control. From the outset, it should have been clear to the meanest intelligence that Mr Davies had to issue a coherent statement explain- ing why he had resigned, in such a way that there would be minimum scope for further probing. It was hardly surprising that Mr Davies himself was unable to think straight; others should have done it for him. Instead, the Government has been subjected to a week of embarrassments, and there are more to follow.
Apropos of Ron Davies, it is hard not to feel sorry for someone who has spent a week being hosed down by the muck spreader, but Mr Davies is not a sympathet- ic character. It is not so long ago that he was making a vile attack on the Prince of Wales's private life. During the last Parlia- ment, a junior Welsh office minister, Rod Richards, had to resign because of an affair; Ron Davies's behaviour was poisonous. There have been many victims of scandal who are much more entitled to sympathy. But the government spin machine has made another mistake, and on a far more important matter. For the first 18 months of this Parliament, Tony Blair appeared to have a clear and sensible strategy on the euro: to decouple it from the next election.
This, after all, was the one major issue on which the Government could have found itself on the wrong side of public opinion; the Tories' sole realistic hope of clawing their way back towards parity. Mr Blair appeared determined to prevent this. He obviously hoped to be in a position to respond to any questions on the euro by insisting that it was not an issue at the elec- tion, because the British people would be able to make their decision in a referen- dum. But Gordon Brown and Peter Man- delson now seem equally determined to bring the euro to the forefront of public debate.
They may well prove to have been guilty of over-confidence. After the last 18 months of opinion poll triumphs, with absolutely no sign yet of a mid-term downturn, they may have concluded that they were impreg- nable. They will have been encouraged to make that judgment by the recent TorY party conference, which was a public rela- tions nightmare, and by the evident disunitY among the leaders of the anti-euro forces, some of whom are far more interested in massaging their own egos than in running an effective campaign. But governments should always beware of being lulled into complacency by the opposition's apparent weakness. In the 1987 Parliament, Labour in effect took the first 18 months off, and in that lull Mar- garet Thatcher pressed ahead with the community charge, as the poll tax was briefly known. It is surprising how quicklY events can create an opposition and dis- credit a government. Up to now, this government has enjoYed an unprecedented immunity from events, but that may be about to change, partly due to Ron Davies. As a result of his misfor- tunes, and the cack-handed way that Alas- tair Campbell dealt with them, sections of the public have begun to laugh at this go'' - er n me nt If that were to become a habit, Mr Blair and his ministers would be in trouble. Gordon Brown, of course, drove Ron Davies out of the headlines, but at a cost. There is one problem with making predic- tions: they might not come true. This week>. Mr Brown was able to disown one set of earlier economic forecasts and still give 3 powerful performance. But he will not be able to get away with that again. This time, he had better be right.
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