Gordon Brown has said he won't apologise for the recession because it is a world recession. According to the IMF there won't technically be a world recession. This year world output will grow by 0.5%. Furthermore of the major economies that are in recession, Britain is expected to do the worst.
But what specifically should Brown apologise for. It seems to me at least three things.
Firstly, presiding over the explosion of state borrowing.
Secondly, for moving bank regulation from the Bank of England to the Financial Services Authority.
Thirdly, for changing the measure of inflation causing the Bank of England to set interest rates lower than they should have been. Eamonn Butler in his excellent book The Rotten State of Britain says:
"Brown discarded the traditional Retail Price Index for a new one, the Consumer Price Index. This had the political advantage of producing a lower number, so that inflation would look less high under his watch. But it ignores housing costs, which are important in Britain. The result was that while house prices were soaring - UK house prices doubled in the five years before the 2008 crash, a far steeper raise than in France, germany and our oher near neighbours - the Bank was focused on other things, so its policy did not sufficiently rein back on borrowing."
Kudos also to Ross Clark who write in The Spectator back in 2004:
"During his first term as chancellor, Gordon Brown was prepared to tolerate house price inflation. Over the past couple of years, however, he has begun positively to encourage it. Most blatantly he has done this by dropping the Retail Prices Index (RPI) as the official measure of inflation and replacing it with the Index of Consumer Prices (ICP). The Chancellor excused the change on the grounds that he needed to bring Britain’s inflation figures in line with those of the rest of the EU. Yet clearly this is far from the whole story. While the former contained a minimal element of house price inflation, the latter includes no housing costs whatsoever: thus the official ‘cost of living’ index now excludes the cost of putting a roof over our heads, as if we all slept over the hot air vents above King’s Cross Underground station. The effect of this statistical manoeuvre is to compel the Bank of England’s Monetary Policy Committee (MPC) to ignore house price inflation when it comes to setting interest rates. While the base rate has risen from 3.5 per cent to 4.5 per cent over the past nine months, it would have risen far faster had the MPC been charged with moderating house price inflation, now rising at close to 20 per cent."
I remember Ross as a jovial cove working on the Evening Standard Londoner's Diary. I never thought that he would prove a financial guru.
