There is absolutely no doubt that Britain’s public finances are a disaster area. The IMF recently said that the Chancellor’s debt reduction programme needed to be on “a firmly downward path faster than envisaged in the 2009 Budget”. Standard and Poor’s rating agency has downgraded the outlook for Britain’s public finances from “stable” to “negative”, implicitly threatening the loss of triple-A status for government debt. Earlier this week the European Commission shot a fresh warning at the Treasury about the soaring budget deficit. The OECD has warned that public borrowing as a percentage of GDP could hit 14% next year. And the Governor of the Bank of England has insisted that the government’s “extraordinary” and “enormous” levels of borrowing had to be reduced faster than the Chancellor planned.
Suffice to say the numbers are beyond appalling and there will be a real possibility of an investors’ strike if the next government does not take an axe to borrowing. The main cause for this disaster has been Gordon Brown’s profligate spending. Of course, the recession has made the situation worse. But this does not excuse our ex-Chancellor from taking the blame for this catastrophe. And, of course he should have repaired the roof while the sun was shining. But he didn’t. And to extend the metaphor, he allowed dry rot, wet rot and death watch beetles wreck the timbers and let the windows fall in and the floorboards give way. Despite many warnings that his profligacy was unsustainable, he merrily showered money on his vote-winning pet causes irrespective of the long-term consequences. Along with the wreckage of occupational pension schemes, the introduction of the fundamentally flawed tripartite system of financial regulation and the sad undoing of the golden economic legacy he inherited from the Tories in 1997, this wreckage is Gordon Brown’s true legacy. And yet I still hear people, though prepared to acknowledge his shortcomings as prime minister, who seem to believe he was a great Chancellor. He wasn’t. He was a disaster. And he was a churlish and dishonest one at that.
When Gordon Brown made his triumphant entry into the faded Edwardian grandeur of the Treasury building (since refurbished at great expense) the healthy state of the economy was explained to him. According to Tom Bower is his biography of Brown an official had said to him “These are fantastically good figures – the state of the economy is much better than predicted.” To which his reply was “What am I supposed to do about this? Write a thank-you letter?” He did not write a thank-you letter. Instead he criticised and vilified the Conservatives’ record – seeking to present himself as the chancellor dedicated to cleaning up the Tories’ mess. In 1997 the public finances were actually heading for the black, not that he ever remotely acknowledged this.
But that was then and now is now. Sadly, tragically for the next government, which I fervently hope is a Tory one with a strong majority for the sake of this country, the economic legacy they will inherit will be anything but golden. On the contrary, it will be a poisoned chalice. As already said they will have to take the axe to borrowing. But I’m sure that I’m not telling the shadow Cabinet anything they don’t already know. And, politically, I suspect the electorate is aware of the need for some belt-tightening. But I’m not sure if they are aware just how much the belt will need to be tightened.
A good friend and ally under these tricky circumstances could be the IMF, especially if the opposition ever had the nerve to oppose the necessary tightening for cheap political advantage. Consideration should be given to calling the IMF in on “day one” in order to work with them on the necessary corrective policies.
Mind you, if there is an investors’ strike calling in the IMF won’t be an option. It will be a necessity.
