The British Take an Unappealing Pleasure in Cutting Down Their Tall Poppies So It Was Inevitable That Comment in the Aftermath of Wednesday's Less-Than-Rosy Autumn Economic Statement by Chancellor Gordon Brown Was Suffused with Schadenfraude
The British take an unappealing pleasure in cutting down their tall poppies so it was inevitable that comment in the aftermath of Wednesday's less-than-rosy autumn economic statement by Chancellor Gordon Brown was suffused with schadenfraude.
Here was the self-styled Iron Chancellor admitting that he would have to borrow u20bn more this financial year and next than he had thought only seven short months ago in his April Budget. The man who prides himself in making more accurate forecasts than well-heeled City analysts and economists had to downgrade his predictions for economic growth from 2-2.5% to 1.6% for this year and from 3-3.5% to 2.5%-3% for 2003. The Labour politician whose reputation had soared on his sound, Presbyterian handling of the country's finances had built his fiscal plans on sand after all.
Mr Brown did not take his fall from grace well, which made the carping all the sharper. He rattled through the bad news as if hoping we would not notice how bad his downgrades were. But we did. He blustered by blaming everybody but himself. Yet he had been warned by most informed commentators (including this newspaper) at the time that his Budget forecasts were too optimistic; and his emphasis on an alleged collapse in world trade to explain the slower-than-predicted British growth was rather undermined by the fact that the one forecast he got right last April - and on which he had based his original economic growth predictions - was the deterioration in world trade.
Undeterred even by facts in his own red book, the chancellor proceeded to blame the world economy. He noted that "20 of the world's biggest economies accounting for 60% of the world's output - the United States, Japan, much of Europe and Latin America - have been in or are in recession after the sharpest slowdown in global economic activity for almost 30 years". In other words, Britain is actually doing rather well in the circumstances and the only reason we're not doing better is because we are being dragged down by the poor performance of others. It sounds a reasonable explanation; but it is wrong.
The US economy, the world's largest (and on which much of world trade depends) actually grew by some 2.4% this year (50% faster than the UK). Other industrial countries which are outperforming Britain this year include Australia (3.7%), Canada (3.4%), Denmark (1.8%), Spain (1.9%) and even socialist Sweden (1.7%). So Brown's Britain is not as special as the chancellor would like us to think. Indeed, it only looks good in comparison with the sclerotic leading economies of the euro zone (Germany, France, Italy), towards which Mr Brown's penchant for tax, regulation and red tape is gradually dragging Britain.
But the chancellor's critics are overdoing the gloom. Mr Brown is right when he says his previous prudent fiscal management means the country can afford the extra borrowing and that even an additional u20bn this year and next (taking the total to u44bn) still leaves Britain's budget deficit well below the 3% of gross domestic product (GDP) ceiling that the major euro zone economies are currently breaking. Nor are his economic growth downgrades disastrous, for all he should have seen them coming. Forecasting, whether by the Treasury or the City, is notoriously inaccurate and it was only a matter of time before Mr Brown came a cropper after such a long run of being right.
The bottom line is that the British economy is in reasonably good shape to weather the current global downturn, fiscal policy is far from profligate despite the extra borrowing, monetary policy will remain sound with the appointment of Mervyn King as the new governor of the Bank of England and the country's longest-ever period of sustained economic growth looks like continuing for the foreseeable future. …