'Give me a hint' is no way to run the UK economy

Published on Tuesday 14 September 2004 02:18

IF PRE-BUDGET speculation leaves you feeling out of the loop, you’re in good company. According to former Downing Street aide Derek Scott, the Prime Minister has been none the wiser, either.

In his book Off Whitehall, Scott reveals how Tony Blair was forced to beg Gordon Brown for a "hint" of what was in one of the Budgets. Blair, writes Scott, was reduced to pleading: "Give me a hint, Gordon."

Scott also claims that the Prime Minister had such a limited grasp of economics that his aides encouraged him to take a heap of textbooks away on holiday - a suggestion that did not amuse Blair.

Fun though such anecdotes are, Scott’s book casts a revealing light on the depths of the personality clash between two of the most powerful figures in government and cannot but raise questions about how long this fraught and brittle relationship can last. For those in business and finance, it casts a deeper shadow. To judge by this account, not only does Brown have a free hand at the Treasury, but he also has a remarkable "right to roam" over many other areas of domestic policy.

The clear inference is that Brown effectively operates a "state-within-the-state". That is a dangerous development in any organisation, and especially in what is supposed to be a democratically accountable government. If the Prime Minister is not in charge, who is?

Arguably more worrying for the business sector is the impression that the Chancellor is running the economy with little reference to Blair.

From an organisational standpoint, such delegation can have much to commend it: the finer details of fiscal and monetary policy are what chancellors are there to manage. Why keep a dog and bark yourself?

But Brown is a redistributionist and has opposed the Blair public-sector reforms. That he has effective carte blanche over tax and that the Prime Minister is either too weak or too uninterested to exercise control - or to regain control that has been ceded - will not reassure the business community that has been desperately calling for less regulation and lower tax.

Tension is seldom far from the surface in relationships between prime ministers and chancellors. The John Major-Norman Lamont partnership foundered on the UK’s membership of the ERM.

Nigel Lawson famously fell out with Margaret Thatcher over his policy on "deutschmark tracking" and her resort to Professor Alan Walters as her personal economic adviser. This infuriated Lawson to the point of resignation. But the long-running Brown-Blair battle is in a different league.

Scott’s book begs many questions. Not least of these is on the degree of consultation within government on such controversial actions as the Chancellor’s 5 billion a year tax raid on UK pension funds, with ruinous consequences for pension fund returns and public confidence in pension saving. Brown has attracted to himself aides who don’t seem much bothered about the damage done to long-term savings and who have been particularly obstructive on pensions reform.

There are other concerns. Few will grudge the Prime Minister a lack of detailed knowledge of economics. He may not be an expert, but he is far from ignorant - and many would sympathise with his lack of humour over suggested holiday reading. But one does expect a modern- day prime minister to have at least an interest in economics and a natural desire for knowledge.

Blair’s weakness of interest here makes me thankful that it was Brown, not Blair, who was the master of the famous five tests on the euro. And it may help explain why the Prime Minister continues to be such an enthusiast for further EU integration when the performance of the eurozone economies is so woeful.

For the record, the euro-zone’s unemployment rate of 9 per cent compares with 4.8 per cent for the UK, while the UK has outperformed the euro-12 in aggregate for 11 out of the past 12 years.

Memo to the PM: you don’t have to smuggle Treasury officials into Downing Street to find out what’s going on. The relevant figures are updated every week in the Treasury’s little red Pocket Databank.

It’s the best publication in Westminster, and I’ll happily put you on the mailing list if it helps.