Outlook: Brown is not such a Tory Chancellor after all

Outlook on the chancellor's budget strategy, the idea of a government stake in railtrack, and the pay-off to Robert Hanson

SO YOU thought Gordon Brown was a Tory, did you? Think again. According to the Institute for Fiscal Studies, the measures introduced in the two Budgets since the election amount to the biggest redistribution from rich to poor for decades.

You'd be forgiven for not having noticed. The pain has been so well and cleverly spread that it has barely been felt. Furthermore, the numbers are not large. The bottom half of earners have gained between a half and three per cent of their income, while the top half have lost just 0.3 per cent of theirs. The figures also ignore the fact that the income of high earners is growing at a much faster rate than that of the low paid, so that the gap between rich and poor continues to widen notwithstanding anything the Government has done to correct it.

Even so, some redistribution has been achieved. It is what Labour Governments are supposed to be for, and the reality is that Mr Brown has already gone some of the distance, despite impressions to the contrary. Mr Brown might appear to be the best Tory Chancellor since the war, but underneath it all, he's Labour through and through.

Part of the cleverness of Mr Brown's approach is that there's so little in it the better off can fundamentally disagree with. Nobody can object too much to the costs of a package of measures to help the poor if the intention is to make work pay. What's more, when this is balanced with progressive measures to help business and enterprise, to complain looks more churlish still. Certainly, there has been some grumbling, most loudly with the Government's attack on pension savings through the abolition of tax credits on dividends, but nearly everything the Chancellor has done has so far paid off, politically and economically.

At the same time, it has been impossible to fault the Chancellor on macro- economic policy. The borrowing requirement has come down faster than expected, and spending control has been tighter than anybody imagined possible. Those who carp that this week's Budget was not tough enough are simply posturing. They would be whingeing about the rising tax burden had it been any tighter.

If there is a cloud on the horizon, it is the strength of the pound. The irony here is that Mr Brown handed the reins over to the Bank of England to take the politics out of interest rate decisions and make sure that if there were tough choices, they would be taken. But who can doubt on his present showing that the Chancellor would have raised rates further and faster if it had been left to him rather than the timorous doves on the Monetary Policy Committee?

Lower interest rates might take the heat out of the pound but given how much of the present monetary tightening in the economy is itself down to the strength of sterling, that could prove very much a double edged sword. The effect would be doubly inflationary. Alternatively, an immediate sharp increase in rates along with a statement, like the one the MPC issued in August, saying there was no more inclination to tighten, might send sterling lower, such is the psychology of markets.

Strangely, then, the one big question mark hanging over Mr Brown's first innings is not one directly of his own making. There's already been a considerable fiscal tightening under Mr Brown; monetary policy has to be allowed to do the rest in the fight against inflation. With the public finances in good shape, the stock market at another record high and a start made on necessary microeconomic reforms, the Chancellor can afford to ignore the few post-Budget grumbles there are.