Gordon Brown is no different from the rest of us. Our credit is good, interest rates are low, so what do we do? We borrow and we borrow big.
The great consumer boom is being mirrored with a public spending boom. Every month we as consumers borrow a further £10bn or more; every month he borrows, on our behalf, £3bn more. We are a nation running on tick.
That is how we have managed to keep growing right through the global downturn, something other developed nations have failed to do. That is worth celebrating and the Chancellor duly congratulated himself yesterday for this achievement.
Unemployment is indeed the lowest of the big economies; inflation remains low; growth this year at just over 2 per cent is a lot better than that of the eurozone, though not as good as the US.
But what is at issue is not these achievements. It is whether they are sustainable. It is easy to keep up your standard of living if you can keep borrowing a bit more against your house. Given the scale of personal and Government borrow it would be odd were the economy not to be growing at about 2 per cent. The difference is that homeowners have a firm date when they have to pay the loan back, but for governments the repayment can be rolled forward for quite a while. Or at least until after the next election.
There is one reason why we should not fret too much about Gordon's borrowing spree and two why we should. We should not worry that this year, by borrowing a projected £37bn he is breaking through the Maastricht ceiling of 3 per cent of GDP. One year does not matter and as he said, this is lower than the borrowings of the US, Japan, Germany, France and Italy. He did not add that Finland, Denmark, Canada, Australia, Sweden and Spain all look like running surpluses, but let that pass.
No, the first of the two worries is that borrowing is turning out to be much higher than expected, despite growth being in the target range, and that projections for 2005 and beyond look as unrealistic as his projections a year ago for the current year. A year ago he told us he would borrow £24bn; six months ago it was going to be £27bn; now it is going to be £37bn. Next year he says it will be £31bn and that is assuming at least 3 per cent growth. If growth is lower - and the consensus of economists is only 2.7 per cent - then what might the borrowing be?
The other worry is what happens in 2005, after the next election, when it presumably will not be Gordon Brown's problem. Accept his projects of growth, accept his projections of tax revenues, accept everything turns out in the favourable way he expects. By 2008 taxation will be the highest relative to GDP that it has been for more than 20 years.
So the first worry is that he may be getting his sums wrong; the second is that even if he gets them right, there will have been a huge increase in taxation. Such an increase might be acceptable if the taxpayers were getting value for money. The fine print of the Pre-Budget Report suggests they are not.
One of the nice things about the Treasury is its mandarin combination of honesty and other-worldliness. Mr Brown's speech was a politician's bombast. If you look at the detail a rather more disturbing picture emerges. On page 184 there is a note about how difficult it is to measure output of the public sector. Thus health and education spending are running 11.75 per cent up year on year, which the figures suggest consist of a real increase in output of 4 per cent and inflation of almost 7.5 per cent. It admits this inflation figure is far more than the increase in government costs, suggesting public sector productivity has plunged.
Now maybe there has been an improvement in the quality of health care and education, and the Treasury has commissioned a report into measuring any such change. In a commercial business, the board would demanding immediate action. You might imagine Mr Brown is worried, given the amount he bangs on about poor productivity in the private sector. So when is the final report due? January, 2005. Another problem for the next Chancellor, not this one.
And that, I fear, has become the objective: puff things up, borrow to keep the books looking all right, take credit for all the good figures, and leave your successor to sort out the problems you have created, or failed to tackle.
That may be unfair. Our economy has done well by international standards and since the Chancellor would have faced the flak had it not, he should take credit for that achievement. But he was lucky in his early years and he must know it. Don't you now get the impression this is job he would like to move on from while everything still looks reasonably all right? Find something else to do? It would not, as someone else said, be an ignoble ambition.Reuse content