Pre-Budget Statement: If this goes on, we'll be richer than Germany by 2020
Wednesday 10 November 1999
Gordon Brown yesterday played each of those roles in turn: the economic overlord, the prudent money-counter and the beady-eyed Santa Claus, giving snippets of good news on each area. That he could do so is thanks to three things, only the last of which is down to him: the structural changes that took place in the British economy under the previous government; the long period of decent global growth and stable UK economic policies over the last two years. But that last point deserves all credit: Mr Brown has earned his moment in the sun.
The economic story has two newish elements. The first, which we pretty much knew, is that growth prospects both this year and next look better than they did even six months ago. Those of us who felt that the Treasury's forecasts were over-optimistic last year have been proved wrong: score one for the Whitehall mandarins, zero for the City scribblers.
The second element, which some of us pretty much hoped for and which, if true, is more important than the first, is the hint that the long- term growth potential of the economy may have risen. The Treasury assumption seems to be that the economy can grow at 2.5 per cent, not 2.25 per cent. Now, a quarter of a percentage point may not seem much, but over a couple of decades it is of enormous importance. If this is right, it is perfectly possible that Britain will be richer than France or Germany by 2020, for it has already narrowed the gap in the last eight years.
To do that means believing not just the Treasury numbers but also Mr Brown's vision of the enterprise culture which he repeatedly asserted the government sought to nurture and support. It is too early to make any judgement on the series of detailed measures that he announced to support entrepreneurship - remember how there is a particularly wide gulf between what Mr Brown says and what he actually does - but the rhetoric is interesting and encouraging.
Role two is the careful accountant, the holder of the nation's finances. The new information is the size of the projected surpluses. The simple point here is that if you have faster-than-expected growth you get faster- than-expected rises in tax revenues. Mr Brown tweaked up the tax take by a series of apparently insignificant measures which often ran counter to his stated intentions. Good example: increasing taxation on pension funds. But the thing that has made all the numbers turn out so rosy has been very good growth.
Sure we have a budget surplus. But so does the US, Canada, Australia, Ireland - all English-speaking economies that have done well over the last seven or eight years. France, Germany and Italy all have deficits because they have grown more slowly. Get growth and public finances come right. Falter and they go wrong. What growth also does is give a war chest for public spending ahead of the next general election. He says he won't spend to excess? He won't need to, for there is so much in the pot that a few hundred millions here and few there can be spent on politically- effective projects (like free TV for the elderly) without making much of a dent on the cash pile.
And role three, the Santa Claus act? It really is like a visit to a department store Santa. The gifts handed out are relatively cheap to make. They are (from the point of view of the child) free. But the theatre of the Grotto is enough to make the kids keep coming. Oh yes, and remember to say thanks to Santa, too. Ho, ho, ho.
That whole exercise in distributing bits of public money sounds wonderful. Lots of tiny little projects: presents for entrepreneurs; presents for home parents; presents for IT training; presents for the voluntary bodies, presented in fact for all the well-behaved. And then there are the punishments for the naughty, the "entrepreneurs" in the informal economy, the smokers, the smugglers, the monopolists. No presents for them - they get the task- force waving the cane.
There is nothing wrong with all this. What we are seeing is a mixture of competent governance and clever politics, both benefiting from the strong following wind of a successful economy. It is exactly the same phenomenon that the US administration is experiencing - or indeed the governments of any democracy that is growing reasonably swiftly. To see the reverse look at Germany or Japan, where people are not getting much richer, where unemployment is getting worse (or at least not getting significantly better) and where the poor old finance minister catches it in the neck.
To say that is not to play down the economic weaknesses correctly identified by the Chancellor. There is a lot to be done, in particular to pull up the parts of the economy that are still below global good practice. When most things seem to be going well is absolutely the right time to tackle the ones that are not. But remember, Mr Brown, that you have been dealt a great hand. Enjoy playing it; and don't you dare muck it up.
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