Magazine article The Spectator

Why Gordon Brown Might Shortly Be Inviting Tony Blair to Dinner

Magazine article The Spectator

Why Gordon Brown Might Shortly Be Inviting Tony Blair to Dinner

Article excerpt

There is nothing intrinsically wrong with more public expenditure, as long as two conditions are met. It must not increase at a higher rate than the economy can sustain, and it must deliver what it promises. On Tuesday, Gordon Brown failed both of these tests, and had no interest in passing.

He told us about the many additional billions which he was proposing to spend, without giving us any reason to believe that they will produce significantly better public services, or that he has solved the intellectual problem which has defeated all previous governments: how to ensure that public expenditure provides value for money. In general terms, ethos-based public services work well: the armed forces, the higher civil service, plus - in the old days - the police and the NHS, which have now lost a lot of their ethos. But public servants who are employed as providers of goods and services do their work less efficiently than their private-sector equivalents.

Let us suppose that in 1960 the government had invited the great supermarket chains to take over the management of the health service on a competitive basis, but also announced that it was nationalising food. Does anyone doubt that we would now have a much better run health service delivering higher standards of patient care, and much worse food? As far as possible, the government should purchase goods and services rather than provide them, so as to accelerate the day when a pound spent by the public sector will be as effective as a pound spent in a grocer's shop.

But Mr Brown has no intention of addressing those problems. Back in 1997, the Labour manifesto stated that it was a `myth' to believe that higher public spending would deliver better public services. That was true then and remains so. There has been only one change: in the government's political priorities. Tuesday's statement was neither a rational approach to public expenditure management nor an economic assessment. It was an electoral gamble.

The British economy has now been growing steadily since 1992, yet Mr Brown seems to believe that it will expand by another 10 per cent over the next four years. A downturn in America or in Euroland; renewed inflation in the UK (there is little slack left in the labour market); even the re-emergence of the business cycle - a lot could go wrong, and many of the crucial factors are outside Mr Brown's control. It would be interesting to hear what Alan Greenspan thinks of Mr Brown's growth forecasts.

Given the uncertainties, a prudent chancellor would conclude that it would be unwise to spend up to the limits of his notional future bounty. But Mr Brown proposes to spend even more money than he expects growth to provide. Sooner or later, this will lead to tears.

There will be higher taxes or higher borrowing - or both. There could also be inflationary pressures, plus long-term damage to economic prospects. Pound for pound, private-sector spending creates more jobs and higher growth than publicsector spending does. So in the longer term, increases in public spending as a proportion of national output lead to higher unemployment and less output.

But we can forget Prudence; she was just for show. For a time, Mr Brown wanted us to believe that he had a long-term commitment to the lass, but that was fraudulent; he merely wanted a respectable girl on his arm for public display. …

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