For Kremlinologists searching for Stalinist tendencies, highlights of Gordon Brown’s last Budget included relentless micro-management (try tax breaks on nicotine patches) and the semi-delusional conceit that the UK economic cycle exactly corresponds to Mr Brown’s tenure as chancellor.
The Treasury hopes that Middle England will instead focus on cuts to headline rates of corporation and personal income tax. In this respect, Mr Brown risks adopting another habit of dictators: contempt for your audience. The £2.2bn benefit to companies in 2009/10 will be almost entirely clawed back through an expansion of the base of taxable profits and raised rates for small companies. Of the £9.6bn benefit to individuals from lower headline rates, three quarters will be clawed back, largely through the regressive move to abolish the lowest tax band. Slap on fuel and property taxes and the Budget’s overall effect is actually to raise taxes, albeit by just £125m. Mr Brown also stuck his “clunking fist” deep into the national silver cabinet, doubling forecast asset sales to £36bn by 2011, an amount that, incredibly, equates to about half of the £68bn of privatisation gains enjoyed by the Thatcher and Major administrations.
The net result? Mr Brown has been able, just, to ride out one final slip in spending projections, without raising public net debt forecasts, which are right on the edge of the limit of 40 per cent of gross domestic product.
In his first set-piece as chancellor, in 1997, Mr Brown said his economic priorities were to raise productivity, cut welfare dependency and create stability. He has largely failed on the first two counts, but the economy has still grown decently, helped by a financial boom and immigration. This in turn has allowed higher absolute public spending than envisioned, some of it poorly deployed.
Has Mr Brown succeeded in his third objective of ending the UK’s stop-go economic performance? With respect to monetary policy under the Bank of England, yes. But the public finances will only be sustainable if the long boom of the past decade is repeated. Mr Brown’s legacy is a calculated bet, not stability.