Question

Explanation about economy begins at home

Answer 1

COVERAGE of Gordon Brown's speech to the CBI last night has tended to focus on what he said about the euro. Despite the fact that Labour's policy has not changed since 1996, every coded phrase, every nod and wink, is pored over by commentators.

It is perhaps more interesting, however, to look at what the Chancellor of the Exchequer had to say about the British economy for which, in the absence of any referendum on the single currency, he remains responsible. For the past four-and-a-half years, the country has been enjoying the fairest of economic conditions. Now, after the events of September 11, comes the true test of a Labour government.

Mr Brown was right to point out that Britain is set fairer than most of her competitors to weather any economic squalls. There is no sign of inflationary pressure, interest rates are low and public finances are sound. Mr Brown understandably claims all the credit for this himself - although, in fairness, much of the hard work was done by the preceding Tory government.

None the less, it would be churlish not to acknowledge that, having been dealt a strong hand, he has played it skilfully. True, he has increased taxes; but he has done so at a time of generally rising prosperity. Indeed, what looked at the time like reckless profligacy can now arguably be presented as strategic counter-cyclical spending.

But times move on. Every other major economy is now seeking to maximise its competitiveness. Not only the United States, but Germany, Italy and even France are all seeking to reduce taxation.

Britain alone is heading in the opposite direction. Mr Brown made some encouraging noises about business taxes yesterday; but, in the current climate, he should also be seeking to stimulate the economy by reducing taxes on savings and investment.
Equally, he should look seriously at cutting regulations. Costs that businesses could sustain during the fat years become insupportable when belts are tightened. Legislation on working hours and unfair dismissal, no less than EU-inspired rules on "health and safety", can, in hard times, make the difference between profitability and bankruptcy.
Reflecting on all this, Mr Brown may have noticed that joining the euro and the Stability Pact would prevent him from taking any necessary anti-recessionary measures. Perhaps this explains the tone of the rest of his speech.

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