The Flash that struck the City

Gordon Brown has learnt from the ghosts of chancellors past, says Jack O'Sullivan
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The Independent Online
The speed with which the new chancellor has gone about radical reform has justifiably earned him the nickname Flash Gordon. In just a few weeks, Mr Brown has handed interest rate decision-making over to the Bank of England and, then, just as surprisingly, shorn the Old Lady of her role as regulator of financial institutions. No one has burst into the Treasury in quite that fashion before.

"Chancellors don't usually hit the ground running like this," says Edmund Dell, a former president of the Board of Trade and author of The Chancellors (HarperCollins). "They tend to take a little time finding out about the job because they don't generally know much about it when they begin."

"I cannot think of any precedent for a chancellor who has acted so decisively," says Lord Jenkins, who himself moved into No 11 Downing Street 30 years ago and, as a political biographer, knows a thing or two about previous incumbents. "I admire the way Gordon Brown has gone about the task."

Jenkins is particularly impressed because, as he says, "most chancellors take over in a crisis and then make the wrong decisions. In Gordon Brown's case, he has not got a crisis on his hands. He has underlying public finance difficulties, but no great short-term problems."

In the Commons on Tuesday, Kenneth Clarke made a blistering attack on his successor, accusing him of "making policy on the hoof, as he did in opposition". But Lord Callaghan, Labour chancellor between 1964 and 1967, thinks Gordon is more than a flash in the pan. "He seems to have worked out his programme and methods needed to a higher degree than I can remember of previous governments. So much attention was focused on this new government in opposition that they were forced to refine their policies and ideas." And, in any case, he says, the Brown initiatives spring from well-rehearsed public debates. "The question of the Bank's responsibilities have been debated for a long time. There are no new arguments."

Nevertheless, Brown's speed remains startling. We have become accustomed to a succession of Tory chancellors - Howe, Lawson, Major, Lamont and finally Clarke - whose reigns merged into one another, and certainly were not begun in such dramatic fashion. Lawson will be remembered as the tax- cutting and reforming chancellor, who had a boom named after him and got out before the bust. But he took his time. So did John Major who waited a year before his disastrous decision to join the European Exchange Rate Mechanism. Lamont was hardly Stormin' Norman, living with the mess Major left, and Clarke did not rush into any early budgets. The then Sir Geoffrey Howe was perhaps the quickest on his feet, abolishing exchange controls in 1979, five months after taking office, a move that was arguably as important as giving the Bank its independence.

So what's the hurry Gordon? Lord Callaghan offers a clue. "I remember," he says, "when I was appointed Parliamentary Secretary to the Minister of Transport in 1947, there was a wise old permanent secretary, Sir Cyril Hurcomb. I was just in my early thirties and it was my first ministerial post. He said, 'Parl Sec, whatever you want to do, take the decision in the first three months. After that the bureaucracy will have built up and will stop you.' It was good advice."

It helps, of course, if you are at one with your prime minister. "Brown could never have done these things without Blair's backing," Dell says. Contrast that with the frustration which accompanied Nigel Lawson's chancellorship, when he failed to win Margaret Thatcher over to joining the ERM and to making the Bank of England independent.

Brown's behaviour may also reflect worries about his Labour predecessors. In Callaghan's case, he will remember that within days of Labour's 1964 election, the then chancellor came to a very rapid decision - not to devalue the pound. "It was," says Callaghan, "a political decision, because we would have been hung, drawn and quartered by the Tories at the time. To devalue then was like sinning against the Holy Ghost." But it was, says Callaghan's successor, Lord Jenkins, the wrong decision. Three years later a sterling crisis was prompted by the 1964 decision, so forcing the devaluation which should have taken place years before. Failure to take the right decision at the right time cost Callaghan his job.

And then there was the tardiness of Jenkins. Following the devaluation, he waited four months before introducing a deflationary budget - a delay that left the markets jittery and led to talk of another devaluation. "With perfect hindsight," he says now, "the budget would have been better sooner." Little wonder that Jenkins adds: "Well done to Gordon Brown for acting decisively and quickly."

Failure to take the tough decisions quickly enough afflicted earlier Labour administrations. Hugh Dalton, Labour's post-war chancellor, avoided a deflationary budget in 1945 by despatching John Maynard Keynes to Washington to raise cash from the Americans. But Keynes came back with half what was expected and in loan rather than grant form. That led to the sterling crisis of 1947 and a harsh deflationary budget, which was two years too late.

Mr Brown may be keen to move quickly to take the tough decisions; but his immediate Labour predecessor, Denis Healey, thought he had learned the lesson of previous dilatoriness, and it did not do him much good. He held his first budget with amazing speed - just three weeks after the 1974 general election. The budget was designed to deal with the enormous balance of payments deficit resulting from the oil price hike. But in the rush, the Treasury got its forecasts wrong with the result that public borrowing rose rather than fell. The mess had to be cleared up in a second budget later in the year.

Many chancellors have been ruined by doing too little too late. Others have just been unlucky. Labour's ghosts suggest Flash Gordon is right to act fast. But more important than being quick is being right.