Michael Brown: Why not tell voters the truth?

How the ghosts of Macmillan, Wilson, Heath and Callaghan must be having a quiet chuckle as they look down, from the great Downing Street in the sky, on the latest economic news facing today's politicians. Rising unemployment and inflation, high interest rates, the pound tanking south, public borrowing soaring through the roof – combined with zero growth – all seem to be combining to make this the moment when 1960s and 1970s booms and busts are back with a vengeance.

But in spite of the economic disasters of those times, at least their governments had, nominally, real powers of control at their disposal. Laws could be passed restricting rises in prices and incomes. Citizens would be forbidden to buy more than £50 worth of foreign currency. Interest rates could be altered on a whim to suit the political timetable, and physical import controls could be introduced to protect domestic industry. The fact that such powers ultimately impoverished and bankrupted the country still made it difficult, however, for Margaret Thatcher to convince many voters of the uselessness of such powers.

Of course, flexible labour markets and the diminution of trade union power make it possible for the present generation of politicians to reject suggestions that we are back to the days of Mr Macmillan's "stop go". But the proud boast from Gordon Brown as Chancellor that he had abolished "boom and bust" now looks like a sick joke as more hubris takes its toll on his popularity rating, in the latest ICM poll, giving the Tories another whacking lead. Mr Brown has no more power to abolish boom and bust than he has to control the weather.

The only silver lining for the Prime Minister is the finding that David Miliband has no greater electoral appeal than the present incumbent. So further leadership manoeuvres may be on hold until after the Labour Party conference next month. Now it appears that the voters of Glenrothes will be as likely to decide Mr Brown's fate as any attempted coup by Labour dissidents.

In the meantime, we are led to believe that Mr Brown has spent his summer break preparing the necessary bribes to forestall such political difficulties with one-off payments of £150 to families with children. This government – as most previous governments presiding over a boom have done – has fallen into the trap of believing that it has been primarily responsible for the good economic state of the country, allowing itself no exit strategy when it seeks to blame the world economy for the downturn.

In the past, whether things have gone well or badly, a government could legitimately claim that outcomes, beneficial or otherwise, were solely down to them. Equally, Oppositions were duly entitled to blame the government if things went pear-shaped. If the pound was devalued, it was perceived as directly attributable to the mis-management of the economy by the government of the day – even as recently as 1992, when Britain left the Exchange Rate Mechanism. Yet, as the pound has sunk in recent weeks by as much as the single devaluation necessitated by Britain's exit from the ERM, there has been barely a murmur from any other party. And, these days, neither the balance of trade or balance of payments even feature on voters' radar – although they played a central role in Harold Wilson's defeat in the 1970 general election.

Of course free exchange rates, along with the abolition of exchange controls by Geoffrey Howe in 1979, were probably the biggest single advances for this country's modern economic prospects. Others would also argue that Mr Brown's move to give control of monetary policy to the Bank of England was similarly beneficial.

But, unlike the 1960s and 1970s, when all the indicators point in the wrong direction, there is actually little, apart from fiscal policy, that any government can now do except to cross fingers and hope for the best. The dilemma is the extent to which politicians wish to continue feeding the public's belief that governments can make a beneficial difference to their standard of living. The truth is ministers can make things worse – but have few economic powers to make things better. On the one hand, Mr Brown has boasted that the good times were down to him. On the other, he claims that the bad times now are all the fault of the rest of the world.

But Mr Brown would be better placed today if he had consistently said during the good times that the economic well-being of the country had absolutely nothing to do with him or the Government. Because of this failure of strategy, the inevitable rise in unemployment, predicted to be two million, according to British Chambers of Commerce, by 2011, means that the Brown government will take yet another political hit.

If Mr Brown had not claimed the credit for "three million new jobs", since 1997, it would be easier for him to pass off any increase in the jobless total as the fault of the worldwide downturn. But unemployment will consequently be as much an issue at the next election, regardless of who or what is to blame.

All this is good news for the Tories but poses the familiar question: "What would you do instead?". The answer is probably "not much different" – apart from, hopefully, on public expenditure and fiscal policy. But equally, this provides the Tories with the chance to make the case that modern governments do not have the economic powers of their predecessors – and even when such powers existed most governments made a mess of their usage.

It may be that the growing inevitability of a Tory victory will enable Mr Cameron to put on the record that, unless he seeks to retake powers over interest rates, exchange rates and prices and incomes, modern governments in free democracies are largely economically impotent. Telling voters what they do not wish to hear is the bane of politics, but such modesty now may serve to re-educate voters that when the next downturn occurs – on the Tories' watch – it won't be Mr Cameron's fault.

mrbrown@talktalk.net

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