PRIME MINISTER Gordon Brown . . . Get used to it, because that is a junction of man and job that is in Britain’s future. True, Tony Blair’s star is once again on the ascent, as he finally confronts the terrorism threat he has allowed to gather force in Britain. But that means only that he might linger a year longer than seemed likely at the time of the last general election. With no credible challenger to Gordon Brown likely to emerge in his own party, and the Tories having once again formed a circular firing squad, the Iron Chancellor is undoubtedly already thinking through just where he wants to drive Britain when he gets his hands on the steering wheel.
The key question for the country is whether Brown, unconstrained by Blair, will become even more Brownite. That would mean higher taxes, more spending on public services without significant reform, still more regulation, and further redistribution of income. Or, with new responsibilities and freedom to develop original policies, will businessmen and middle-income taxpayers see a new, gentler Brown?
The public Brown gives little clue. His view of political necessity combines with his natural zest for combative argument to require him to defend every whit and jot of his policies. But it seems a good bet to assume that the private Brown understands the nature of some of the criticisms, and is applying his considerable intellect to devising solutions. Not that he is prepared to become a laissez-faire prime minister — even his intellectual hero and fellow-Kirkcaldian, Adam Smith, would not recommend such a course of action, which the Chancellor used the occasion of his Pope Paul VI Memorial Lecture to point out.
So what is it reasonable to expect? First, a Prime Minister Brown cannot avoid the need to invest in Britain’s infrastructure. Its roads, rail and other transport facilities need funding. Given the Government’s decision to confiscate the investment of Railtrack’s shareholders, a decision in which Brown’s top adviser played a major role, investors know that nationalisation without compensation is not a thing of the past. So the funds will have to come from the Treasury, perhaps from taxes with a green tinge.
That should be more annoying than controversial, especially if any emission taxes are accompanied with the lowering of other levies. The real controversy will surround the policies that Brown has favoured thus far: will they endure his prime ministerial reflection? Here are some guesses.
One of the most controversial of the Brown policies has been the means-testing of pensions, a policy unloved by economists who fear the disincentive it creates to saving, and by No 10. Look closely at the Chancellor’s defence: it is that a one-time problem of meeting the needs of penurious widows, who have no ability to save, had to be solved without putting a huge burden on the Treasury. So only the pensions of those in dire need were raised.
Brown has never defended means-testing as a long-term, overall solution to the pensions shortfall. Neither is he likely to sign on to Adair Turner’s likely effort to persuade or force people to save enough to enable them to retire on, say, 70 per cent of their average incomes — or some such formula. So he will have to come up with an affordable policy, built around providing incentives to save. That will require abandoning the means-testing that so appeals to his egalitarian instincts.
Then there is the “golden rule”, and its monitoring. The rule is likely to remain in place, since to-be-Chancellor Ed Balls is one of its strongest defenders. The only question is whether Brown will accede to demands that an independent agency be established to call the turning points in the business cycle and otherwise determine whether the rule is being adhered to. He won’t. In Brown’s view, allowing an independent agency to make such a decision is equivalent to allowing it to decide when taxes must be raised — a chore he feels should be reserved for politicians or, more precisely, for himself. Or, so he says. Brown knows that his refusal to turn the job of calling the turning points in the business cycle over to an independent agency — the US model — damages his credibility, as it should. So the tenacity with which he clings to the right to grade his own performance suggests that he prefers reduced credibility to the loss of control over the ability to self-grade his performance.
Nor will there be any changes in the benefits policy that has produced a flood of cheques to people who are not entitled to them, and short-changed other intended beneficiaries. The Chancellor’s critics see this as an administrative cock-up that some think can be improved by tweaking the Treasury’s computer system, and others think is the unfixable result of the complexity of the system. Brown disagrees. The cock-ups are intrinsic in his decision to pay benefits at the start of each quarter. If the recipient’s circumstances change during the quarter after the cheque is received, there will inevitably have been an under or over-payment. That, thinks Brown, is the lesser of two evils, the greater evil being to require recipients, who might need the money, to wait until the quarter ends. Whether that defence holds water, or whether we have still another example of a policy so complex as to require excessively costly implementation, matters little: the policy will not change.
It is in the more important area of preparing Britain to withstand the heat of global competition that my guess is that we will see a modified Brown, perhaps even the very model of a modern prime minister. Start with this: the Chancellor’s belief in income redistribution is deeply held, and to the extent that he can he will transfer incomes from richer to poorer British taxpayers, and from richer to poorer nations. Having no personal need for conspicuous consumption, he is unsympathetic to high-earners’ desire for big houses, big cars, big TV screens, and bling bling. But I am willing to guess that Brown now knows that he must temper his egalitarian instincts in order not to reduce the incentive of entrepreneurs to take the risks necessary to create jobs and to innovate. So look for further modifications in the tax code so as to favour small entrepreneurs. Whether these will be sufficient to offset PM Brown’s instinct to respond to foreign competition with still another doomed government programme, whether intellect will trump ideology, only time will tell.
Finally, we come to the red flag that Brown has so frequently waved in front of the business bull — regulation. It is no secret that still another task force has been set up to eliminate uneconomic regulations. Before yawning, consider this: the goal is to employ risk assessment to separate the regulatory wheat from the regulatory chaff. If the data suggest that the probability of a violation is low, the regulation will be repealed or the intensity of costly scrutiny reduced. This is the sort of thing that Brown is capable of implementing to make certain that the civil servants don’t subvert it, as they have so many other plans to reduce the burden of regulation, and hence their power.
Don’t get me wrong: Brown is no Blair, and he certainly is no Tory in Labour clothing. Nor is he likely to cede completely to the market the job of bringing the British economy into the 21st century, or of distributing the income and wealth that the economy generates. He believes too deeply in people’s moral obligation to one another, and has too much confidence in his own ability to do those jobs more efficiently and with greater fairness than an unimpeded market. Nor is he likely to pressure the social services to reform as fully and quickly as his critics would have him do.
But neither is it conceivable that he is unaware of the damage that his EU colleagues have done to their economies by clawing for the state 50 per cent and more of national income, and cowering before the trade unions. It is possible that when it comes to the share of the UK economy Brown intends to requisition, the past, with its steady increases, is no prologue. He will undoubtedly continue to conjure up new programmes, but the best guess is that they will not create enormously increased drains on the public purse. Brown does not want to be remembered as the PM who overtaxed and overregulated Britain, dooming it to further declines in the league table of nations — which will be his fate if he proves intellectually incapable of absorbing the lessons of past overreaching.
