A very Brown Budget

UK chancellor Gordon Brown’s budget has been discussed as his most ambitious yet – as a massive political gamble, even heralding a return to Old Labour-style socialist principles.

‘Brown bets all on the NHS’ read a typical newspaper headline, highlighting the Budget’s £40billion cash injection over five years into the health service. To pay for this, and the other increases in public spending, a one percent rise will be levied upon National Insurance contributions from both employers and employees.

It is easy to get carried away with big sums of money, coming from this previously tight-fisted New Labour government. But the hyperbolic discussion surrounding the Budget could do with an injection of reality. One penny on National Insurance is hardly the makings of a socialist revolution; throwing cash at the NHS is not the hallmark of Old Labour.

The fact that the Budget can be talked of in this way only indicates how narrow the terms of government economic policy have become. When relatively moderate measures are discussed as so ambitious and unusual, it shows how we have become used to the constraints within which the UK economy now operates.

Over the past few years, the Budget has become more of a religious ritual than a political act. Like ancient sages, the pundits pore over the details of Gordon Brown’s speech and the related Budget documents as if they were holy texts. But hardly anybody even considers questioning the fundamental tenet on which the bizarre proceedings are based: the need for a prudent approach to everything.

Much of the Budget coverage will continue to examine in excruciating detail the likely difference that the chancellor’s measures will mean to different types of families. Given the complexity and range of the details announced this allows ample scope for huge newspaper supplements and hours of mind-numbing TV. Factors that could affect such calculations in relation to this year’s Budget include whether those involved are members of an amateur sports club or drink beer in village pubs. These are on top of the usual criteria such as age, number of children, income, and propensity to ‘sin’ (including drinking, driving, gambling and smoking).

But the key Budget issue – Gordon Brown’s attachment to prudence – goes unquestioned. Given the number of times he uses the word and synonyms for it – including caution, discipline, responsibility, stability and sustainability – it is clear that this concept has become an article of faith for those involved in the Budget.

Indeed, the main purpose of the budgetary process today is that of a public reaffirmation of faith in New Labour’s cautious approach. It is not just a question of Brown saying that the Treasury will pursue a cautious economic approach. Brown’s role in government is also to ensure that other ministries are steeped in New Labour’s version of rectitude.

The Budget speech used to be a key part of British economic management. It would spell out the big decisions about spending and government revenue which were central to economic policy. Chancellors would use such levers to try to move the economy in the direction they saw as appropriate. Under such circumstances, the contents of the chancellor’s red box would be genuinely new to all but a few political insiders.

Brown’s culture of caution has reshaped both the budgetary process and the content of economic policy. He started to modify the meaning of the Budget with his first act as chancellor in 1997, when he announced that the Bank of England would be made ‘independent’. In other words, an unelected body of technocrats would set interest rates rather than the elected chancellor, answerable to parliament, who had done so before hand. Brown explicitly stated that such decisions should not be political, because if they were they could generate instability.

The move also had the effect of reducing the importance of the Budget. The focus of economic policy shifted to monetary issues (those related to interest rates) rather than fiscal ones (related to state spending).

After that, the chancellor introduced a pre-Budget statement in the autumn, which would precede the Budget in the spring. So yesterday’s Budget (17 April) was preceded by a statement in November 2001, which spelt out the key assumptions of the following Budget (1). Anybody who had read this statement, and indeed previous ones, would not be surprised by the ‘news’ that the government intended to raise health spending substantially.

But even this level of forewarning is not enough for New Labour. Some measures on taxation were announced before the Budget, and with a week to go the government’s PR machine frantically leaked likely measures (2). Prime minister Tony Blair and former cabinet minister Peter Mandelson lent their names to articles that endorsed the chancellor’s approach (3).

New Labour’s extension of the budgetary process is partly a reflection of its fear that its policies might provoke an unfavourable reaction. Rather than have a public debate on the direction of the economy, it seeks to conduct all discussion in narrow channels. For, in New Labour’s view, nothing is as likely to be so destabilising as having a democratic debate on the wider issues.

The protracted character of the process is also a result of the Treasury’s key role in policing prudence. It is a public and semi-permanent reminder that expectations should always be ‘realistic’. Any expression of ambition is seen as bringing with it the risk of a return to the hellish days of ‘boom and bust’.

As I have previously argued on spiked, the elevation of caution above all else is a key problem in relation to economic policy (see New Labour’s economy: healthy, sluggish, dull). It inevitably acts as a barrier to achieving ambitious economic goals.

For instance, it is possible to make stability the top priority while also supporting economic growth in principle. Indeed, Brown does – no doubt genuinely – want to promote economic growth. The problem is that if prudence is the starting point then any dynamism will always be viewed with suspicion, since it risks stoking up instability. So those who are attached to the cautious approach will hold back nervously rather than boldly promote growth.

Yet economic growth is a precondition for raising living standards and moving society forward. With a larger economy it is possible for individuals both to have more material things and to enjoy more spare time to pursue their interests.

In contrast, the culture of caution promotes a climate in which ambitious economic development is viewed with anxiety. It leads public discussion to become more preoccupied with minute technical details rather than how to make society better off. The worship of prudence is the religion of New Labour with Brown as its high priest, but it is not a path that others should follow.

Daniel Ben-Ami is the author of Cowardly Capitalism: The Myth of the Global Financial Casino, John Wiley and Sons, 2001 (buy this book from Amazon (UK) or Amazon (USA)). He is also a contributor to Cultural Difference, Media Memories: Anglo-American Images of Japan, Continuum International Publishing Group, 1997 (buy this book from Amazon (UK) or Amazon (USA)).

Read on:

New Labour’s economy: healthy, sluggish, dull, by Daniel Ben-Ami

NHS in traction, by Dr Michael Fitzpatrick

spiked-issue: Economy

(1) The November 2001 Pre-Budget Report and related documents are available at the at Treasury website

(2) ‘Britain: More tax breaks unveiled ahead of Budget’, Financial Times, 30 March 2002; and ‘Brown lifts lid on £500m Budget tax breaks’, Financial Times, 27 March 2002

(3) ‘A battle half won’, Tony Blair, Observer, 14 April 2002; and ‘A tax-raising Budget is nothing to fear’, Peter Mandelson, Financial Times, 15 April 2002