This week, he can be accused of being neither. Barely more than three months ago, Gordon Brown was cheerfully forecasting 2 per cent growth when virtually every commentator, including our own, suggested that the Asian crisis would make this impossible. Now he is halving the figure, as if foreign events had come out of the blue just yesterday to change his plans. In announcing revised figures in Washington, several weeks before they are to be presented to Parliament, he is also quite deliberately putting the heat on the Bank of England to start moving interest rates downwards, earlier than it might wish. What we are seeing is an "Iron" Chancellor up to all the old political tricks of his Labour predecessors, not to mention those of many of his Tory forerunners as well. It's called trying to have it both ways. This comes each time economic developments, however predictable, move in ways that you don't want.
That doesn't necessarily mean that the Government's accounts will immediately dive into the red, as Tory opposition spokesmen were charging in Bournemouth yesterday. In that sense, Brown was both cautious and prudent in his June expenditure statement. His spending figures left considerable room for error. On present figures he could, as he claimed yesterday, still keep within his budget, despite the gloomier growth figures. But the word is "could".
Where the Chancellor is being less than totally honest is in not admitting openly that he now has virtually no room for manoeuvre left. Nor is Gordon Brown being totally open in his dealings with the Bank of England. His dilemma is acute. The terms of reference of the Monetary Committee, now meeting to decide the next step, are too narrow. The Chancellor in Washington worries about growing world recession. The committee has to worry about the continued high rate of wage increases at home. In response to the US Federal Reserve's clear concern about a global banking squeeze, the Bank of England's Governor, Eddie George, declares there are no signs at all of a credit crunch in the UK.
If that really is his belief, he is wrong. Just as the Bank, on the Governor's own admission, was too slow in putting up interest rates last year, so it could well be too slow in bringing them down again. On grounds of banking confidence and international pressure, never mind internal British circumstances, the case for an immediate reduction is overwhelming. But if the Bank chooses excessive caution instead, that is its judgement. Trying to shout it on from the sidelines, as the Chancellor is doing from Washington, makes no sense. The decision to set the Bank of England free was the right one. But it does involve letting it making bad decisions as well as good.
That is the real criticism of Gordon Brown today. Much of what he has done is right: setting a three-year programme of expenditure, keeping the lid on state spending, divorcing government from interest rate decisions. But you cannot then try to escape the consequences. If things go badly, then the Chancellor will be faced with hard choices between rising taxes, reducing spending still further, and resorting to borrowing. On that, Francis Maude is right. Promises, or at least assurances, will have to be broken.
What we need from Gordon Brown when he publishes his revised figures next month are not mantras of prudence and caution, but honesty. Circumstances change, and so must policy. If he shares that humility publicly, he will show that he is different from his predecessors.Reuse content