Hamish McRae: Gordon Brown deserves all his bouquets, but his successor might only be thrown brickbats

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So this week the election will be called - and, as the headlines are already shouting, "Brown grabs election agenda".

So this week the election will be called - and, as the headlines are already shouting, "Brown grabs election agenda".

Now that the Chancellor has been brought out from the shadows to be the star of Labour's team, the Government's economic record will be at the front of the campaign. Well, actually it was clear all along that it would have to be, for the record does indeed look remarkably strong.

But, as everyone is aware, this performance is clouded by a slight sense of concern, for in recent weeks there have been mounting worries that after the election the picture may start to appear rather less rosy. There are concerns about the prospect of tax increases, about the public sector deficit, about the weakness of house prices and, more generally, about future economic growth.

You can see how the economic element of the campaign will develop. On one hand, Gordon Brown will proclaim yet again that he has been steward of the economy during its longest period of uninterrupted growth in the history of the country. On the other, the Opposition will point out that the first part of the long boom was under the Tories, that recent policies have undermined its vigour, and that the future carries serious risks.

If it is easy to see the shape of the arguments; it is much harder to stand back and be dispassionate about their merits. That is not just because people have political prejudices. It is also because the lags in economics are long - certainly longer than the life of a parliament - and we really don't know how the economy is going to perform in the next four or five years.

Still, there are some judgements that can sensibly be made and some points that are indubitably true. Let's start with a few of the latter.

Fact one is that the UK came through the last global downswing in better shape than any of the other large developed economies (the so-called Group of Seven). It was the only one not to have a single quarter when it shrank - or, in the jargon of economists, "negative growth".

Since the bottom of the cycle, it has grown strongly - not quite as fast as the US but, as the first graph shows, faster than Japan or the eurozone. As a result, Britain has the lowest unemployment of the large economies and this has been achieved with very low inflation - on most calculations the lowest of the Group of Seven. This is an enviable achievement. Whatever view you take about the amount of credit that should go to Mr Brown's predecessors for transforming Europe's weakest and most rigid economy into what was by the mid-1990s arguably its most flexible one, the fact remains that the Chancellor has delivered eight years of solid and stable growth.

Fact two is that much of the reason for our swift growth since 2001 has been the fiscal boost that has come from a swing of public finances from surplus to deficit. As the second graph shows, Mr Brown inherited a budget that was just about in balance; he then built up large surpluses in his first term, which he spent in the second. The swing from a surplus of nearly 4 per cent of GDP to a deficit of more than 3 per cent is the largest fiscal boost of any G7 country - larger even than the US. It may have been right to do so and the overall indebtedness of the country is still lower than it was in 1997. But it does go a long way to explaining why growth has been so strong.

Fact three is that there have in the past few months been signs that the boom is slowing. House prices have levelled out, though don't be frightened by the "biggest fall for 10 years" headlines, for the 0.6 per cent fall last month is tiny when set against the rises of the past year, and the volume of transactions is now rising again.

But retail sales are slack and real incomes are no longer rising. Last week the Institute for Fiscal Studies showed that average real incomes fell last year for the first time in more than a decade (the average - or arithmetic mean - incomes and median incomes are shown in the third chart).

So we have stopped getting richer. This may just be a blip but it does account for people feeling ratty. Under Margaret Thatcher's governments, average incomes rose by 2.9 per cent a year, and under Tony Blair they have gone up by 2.5 per cent a year. But under John Major they only rose by 0.8 per cent a year and look what happened to him. People do not just vote with their wallets but their general sense of well-being must to some extent be affected by the speed at which their real incomes rise.

This leads to a further question: why, if the economy is growing at more than 3 per cent, are people not getting richer? The experts will have to clamber over the figures a lot more before we really know the answer, but it must be something to do with the fact that we are choosing, as a country, to take a larger proportion of the additional wealth in public rather than private spending.

If voters really want to do that, it is their choice. My own view, for what it is worth, is that similar improvements in public services could have been achieved had the additional money been fed in slowly and thoughtfully instead of in a great wodge. The result would have been better value for all. But the plain truth is that money spent on railways is money not available to be spent in the shops. The huge swing into deficit concealed the size of the bill for additional public spending: the money was borrowed rather than taxed. We have now reached a point where the deficit cannot be allowed to grow, and indeed on the Treasury's own figures will have to be cut. That will almost certainly require tax increases and/or spending cuts and those decisions will be taken after the election.

And there's the rub. Mr Brown has been an extremely successful chancellor and deserves all credit for delivering both stability and growth. But success has been at a price, and that price will become more evident in the next parliament. Clearly it is time for a new chancellor.

Lord Roll: economist, diplomat and Warburg's gentleman banker

Some words of appreciation for the economist, civil servant and banker Lord Roll, who died on Thursday aged 97, for there were many remarkable things about him and his career. He stands out for having three quite different careers and continuing in his last one, as an international banker, until extreme old age: he was in his office at UBS last Monday.

Eric Roll was one of that extraordinary group of immigrants Britain received from the mayhem of inter-war Europe. He was born in what was then Austria in 1907, came as a teenager to Britain, studied economics and then taught it at University College, Hull, in the 1930s. As well as teaching, he wrote - his A History of Economic Thought became a best-selling textbook for generations of students.

He then had a second career, as a diplomat in Washington during the war and subsequently as a civil servant through the 1950s and 1960s, with spells in Britain interspersed with jobs at the Organisation for Economic Co- operation and Development, Nato and as a British board member at the IMF and World Bank. He ended that career as head of George Brown's Department of Economic Affairs.

Finally, he joined two other emigrés, Siegmund Warburg and Henry Grunfeld, at what was then the most dynamic of London merchant banks, SG Warburg. He became its chairman, staying on as president and eventually as adviser after the takeover by the Swiss.

So a career of many parts and a great example of vigour in old age - no nonsense about early retirement or trousering golden handshakese. But there seems to me to be another aspect of his personality and career that reflects ideas which are worth pondering.

One was the notion that financiers should give wise advice to clients rather than just try to earn fees. Merchant banking was, in today's jargon, "relationship driven", whereas investment banking is "fee driven".

There is no going back to the pre-big bang world of London's merchant banks, for the City is now one centre (in many areas the largest centre) of global investment banking. But at some stage we will surely have to modify a system that pushes company executives into mad takeovers and mergers just because this is the fashionable idea of the markets at that moment.

I caught some of those reservations when we last met a few months ago. That thought led to comments that we had to pull back from the excessive belief in the market which now dominated economic life. He blamed much of that on Margaret Thatcher: "Dreadful woman," he said with a half smile. "Dreadful woman." But that is history. He was, the old civil servant, far too discreet to volunteer a judgement on Tony Blair.