Gordon Brown is odds-on to be prime minister by 2008. How different from Blair would he be? What are his foreign policy ideas? What about his adamantine personality and his Scottishness? Admirers and critics speculateby Irwin Stelzer / October 23, 2004 / Leave a comment
Published in October 2004 issue of Prospect Magazine
Statist but prudent
by Irwin Stelzer
Rupert Murdoch’s unofficial ambassador to Britain sees little to fear in a Brown premiership
It is not certain that Gordon Brown is headed for No 10 – the only person who might know when the job will be open is Tony Blair, and he isn’t saying. Besides, Blair is not in complete control of the timing: even if he decides that he needs another full term to accomplish his goals, there is always the possibility that events might intervene to put Brown into No 10 at some point during the next parliament.
At present Brown has no serious rival. But he is essentially a one-issue politician – he has delivered a robust economy, one that appears to have reduced unemployment and, along with a rapid-fire series of tax increases, has provided a big supply of funds for the expansion of the public sector. If there is a recession – and at some point there will be one – the chancellor will become vulnerable to the many enemies he has made among his colleagues by making clear the gap between their IQs and his. (The inevitability of a recession is also a reason for Brown wanting to get his hands on the crown sooner rather than later; inheriting the premiership with the economy tottering and the Tories rejuvenated would not be fun.)
But one would demand long odds to bet against the proposition that Brown will one day inherit Tony Blair’s job. Blair will probably want to cap his career in another, global, job – UN secretary-general? – or secure his beloved family’s financial future (the prime minister aspires to a higher material standard of living than does the son of a man of the manse).
To register an informed guess about how different Brown would be from Blair once in No 10, we must start by disposing of two popular misconceptions about both men. It is simply wrong to think of Blair as the sizzle and Brown as the steak. That underestimates both the former’s substance and the latter’s ability to charm. It is equally wrong to think of the prime minister as a waverer who panders to the popular mood, and the chancellor as a man steady in pursuit of an unchanging agenda.
The reality is that Blair has faced down the majority of his party, and the great mass of the voters, it seems, in pursuit of a foreign policy that includes an unpopular war in Iraq, signing on to the new, centralising European constitution, and fighting to replace the pound with the euro. Not a vote-winner in the lot.
Meanwhile, Brown, while certainly a man who knows the direction in which he wants to take Britain, has shown flexibility in getting there. There is no secret about his goals: redistributing income from upper and middle Britain to the poor; replacing welfare with work; setting macroeconomic policies that include quasi-independence for the Bank of England (“quasi” because he continues to set the Bank’s inflation target) and a coherent fiscal policy built around his famous “golden rule”; raising taxes by stealth when possible and overtly when concealment is impossible; shovelling more money to the public sector than it can efficiently absorb, at least initially.
But, like Blair, Brown is not above the strategic retreats necessary for the successful realisation of his vision. If soaring oil prices make it politic to waive an increase in petrol taxes, the increase is waived. If handing more money to the department of trade and industry, which he detests, is necessary to buy peace and support in cabinet, the money is conjured up. As prime minister, Brown would remain the pragmatic ideologue that he has been ever since taking over the treasury.
The domestic policies of a Brown government are easier to discern than the foreign. The key, as now, will be policies that stimulate sustainable economic growth. That growth is necessary if the economy is to spin off the higher tax revenues Brown needs to fund his continuing expansion of the public sector.
The chancellor likes to point out that the 602,000 decline in the number of unemployed since 1997, and the fall in the unemployment rate from over 7 per cent to around 5 per cent, allows him to spend on the NHS and education money that previously went to finance the dole queues. He is less happy to note an increase of some 100,000 on disability benefit or that the 600,000 increase in public sector employment just about equals the decline in total unemployment.
This prompts a health warning that should be attached to all government statistics, including many of those cited here. My experience with private briefings on trends in crime and student performance has taught me that good statistical method is not a top priority of many in this government.
But even allowing for a bit of self-serving statistical hocus-pocus, there is no denying that the British economy has performed rather well since Brown set the macroeconomic framework. Yes, consumers have borrowed a lot of money, but the increase in the value of their homes has combined with low interest rates to keep their debt burden bearable. And yes, the government has been borrowing more, but (so far) not so large a portion of GDP as to call the soundness of its fiscal condition into question. And yes, the government is taking a larger share of the economic pie – at present, one out of every five workers is on the public sector payroll, but one out of every three new jobs created since 1997 is in the public sector.
But Brown has made clear that he does not believe talk of the dire political consequences of higher taxes; he believes that if more spending discernibly improves public services, the voters will be more than merely forgiving. So spend he will.
Data provided to me by the treasury show that Brown is planning to lift public spending as a portion of GDP to 42.3 per cent in 2007-08, well above its low point of 37.4 per cent in 1999-00. He likes to point out that 42.3 per cent of GDP remains a bit below the 42.4 per cent that prevailed in the last year of the Tory government (oddly enough, he seems to be wrong about that: in 1996-97, government expenditure came to 40.8 per cent).
The Brown upturn is partly a result of the increase in spending on the NHS, rising from 5.4 per cent of GDP when he took control of the public purse to a projected 7.8 per cent in 2007-08. Few deny that the NHS needed an infusion of funds, especially if capacity was to be expanded to permit the greater choice that is the prime minister’s goal. Unfortunately, it is difficult to determine whether the added funds for the NHS are being spent efficiently. The treasury claims that 90 per cent of the increase in staffing has been “at the frontline,” and that the planned further near-term increase in staff, totalling some 143,201, will also augment the “frontline” fighters. But an examination of that figure shows that only 9,021 of the new positions will be filled by “consultants and non-consultant career grade doctors and junior doctors,” 8,058 by GPs and GP practice staff, and 32,271 by qualified nurses. A group of 67,457 “support to clinical staff” makes up the bulk of the other positions.
Are all of these newcomers producing better results? We cannot know, for three reasons. First, it takes time to build up capacity in the system: money spent now cannot be expected to pay off for some time. Second, productivity in healthcare is notoriously difficult to measure. Third, the government has a history of changing definitions, selecting unrepresentative years for comparison, and warning healthcare providers when the inspectors are due to call, permitting a temporary sprucing up of the data. My guess is that Brown is making a political calculation: he does not believe that the money must be spent efficiently for the higher taxes to be acceptable – the public is not capable of exquisite cost-benefit analyses. All he needs in order to win votes is some improvement in services – even if the improvement is trivial compared to the money being spent to get it.
It is, therefore, not unreasonable to guess that, unrestrained by a prime minister who worries more about middle Britain’s sensitivity to further tax increases, Brown will move public spending from its current level of about 41.5 per cent to 45 per cent of what he hopes will be an ever-growing GDP. That would give him a larger slice of a larger pie with which to fund his domestic agenda. It would also put him roughly where he is comfortable – midway between the US and EU models.
Brown famously sees much that he likes in the US model. He admires risk-taking, entrepreneurial America, which is why he was so keen to change the bankruptcy laws so that one failure did not forever sideline an entrepreneur, and to reduce capital gains taxes on small business. (His admiration is, of course, selective and he chooses not to see lower personal tax levels as a key part of US dynamism.) He abhors barriers to competition, not only because competition produces efficiency and cheaper goods, but because the removal of entry barriers is a key to the socially mobile, opportunity society he is trying to create – in place of what he calls “a closed circle of the privileged.” Hence tough competition laws that include provision for the incarceration of price-fixers.
The chancellor also sees much that he dislikes in continental Europe. He believes that Europe’s rigid labour markets are responsible for the eurozone’s persistent high unemployment. He is convinced that the stability and growth pact, with its requirement that deficits not exceed 3 per cent of GDP regardless of the phase of the business cycle, is a nonsense, and should be replaced with his own “golden rule” that permits more economically sensible and flexible responses to different phases of the cycle.
Still, he is not ready to accept a safety net as porous, or levels of inequality as great as those in America. Brown is a redistributionist to his core, and operating from No 10 he is likely to be a more aggressive one than the current incumbent. Free from any lust for fine clothes, large mansions or fast cars, he views income beyond a quite modest level with suspicion – to be left in the pocket of the person who earned it only to the extent that it provides an incentive to hard work and risk-taking. Brown believes that at least some of the current inequality in British society is a legacy of the class system. This justifies higher taxes on the well off, and an increase in transfer payments to the less well off. It justifies hostility to elite institutions such as Oxford, and a willingness to saddle private hospitals with uneconomic work rules. It justifies, in short, a government crusade to countervail the still enduring inequities created by class. Blair speaks the language of social justice with sincerity; Brown is a seething cauldron of resentment at the institutions and people that make life less than fair for many Britons.
Surrounding all of this is an emphasis on growing the pie that is to be redistributed and – an old-fashioned, Victorian twist – on redistribution only to “the deserving poor” to the extent that this group can be identified. Those who will not join the many training and job placement programmes that pour from the chancellor’s pen are not the objects of his concern; those who work but cannot afford a holiday for their family, or nursery school for their two year old, are.
Would Brown as prime minister be willing to attack inefficiencies in the public sector with the same vigour with which he assaults the rigidities in the private sector? That boils down to the question of just where he stands on the role of choice, the only instrument capable of improving the quality and lowering the cost of provision of healthcare and education.
Blairites tend to portray the chancellor as an opponent of reform, and most particularly an opponent of allowing patients to choose their doctors, and parents to choose their schools. The truth is more complex. Brown has always styled himself a realist, opposed to announcements that are no more than photo-ops – which is how he regarded speeches about extending choice in the early days of Labour in power when the health and education systems did not have the capacity to permit the exercise of choice. Now that the flood of cash has added some capacity, and choice is becoming more possible, the chancellor has to consider just where he stands. His original position was that even if sufficient capacity did exist in the healthcare system, the gap in the information available to healthcare providers compared with that available to less informed consumers – the so-called “information asymmetry” – is so great that patients cannot be allowed to choose. Doctor and Westminster know best.
But in a demonstration of his capacity to assimilate new information, and incorporate it in policy, Brown has recently edged towards allowing greater patient choice. His reason: modern-day consumers are better informed about their treatment options, narrowing the information gap between them and their health care professional. Score one for reform.
But the chancellor cannot shed his statist skin completely. He still believes that the issue of choice remains more a slogan than a policy, and in this he has recently been backed up by many of the foundation hospitals themselves which have stressed the importance of capacity for making choice possible. Moreover, from the vantage point of a man brought up in a small town in Scotland, Brown believes that patients want to be near their homes and families, and will rarely take up the choice of superior treatment at a more distant facility. After all, argues Brown, two thirds of local hospital beds are devoted to emergency care and maternity cases, the first for which there is little choice but to head for the nearest hospital, and the second for which he believes patients do not even consider using a distant facility. Besides, as the man who is providing the money to the NHS, Brown wants to retain control of how it is spent. That means centrally determined targets rather than the chaos of free patient choice.
What about a Brown foreign policy? We know that his enthusiasm for further integration with the EU is slender. He has seen how the excessive regulation of product and labour markets, and the ill-considered fiscal policies of the EU, have stifled economic growth and swelled the dole queues. He knows that the euro and its one-size-fits-all interest rate have extended Germany’s recession while at the same time fuelling inflation in other countries. And he can see the difference between the professionalism and performance of the Bank of England and the incoherence of the European Central Bank. So until he sees real economic reform in Europe and the adoption by the EU of something like his own fiscal rules, he is far less willing than Blair to put Britain’s economic achievements at risk by tying its economy to that of the EU.
Another foreign policy difference is likely to be a shying away from Blairite-style interventionism. Brown would not want to abort the special relationship with America, but neither would he go as far as Blair to nurture it. Blair has made it clear that he is willing to take a lot of domestic and international heat in order to stand shoulder to shoulder with America, whether under Bill Clinton or George W Bush. Blair is a man for whom the creation of a new world order – with Britain the bridge between America and Europe – is a compelling vision, Brown is rather more inclined to confine his America-loving to that nation’s dynamic, entrepreneurial economy.
Whereas Blair sees many foreign policy issues as black and white, Brown sees them as black and red – as in ink. He wants to conserve his resources for use on the home front, especially since he is far from certain that the peoples of the world aspire to democratic institutions, a deeply held conviction of the prime minister and his American ally. Faced with the choice of ending a dictatorship by spending money on a military expedition, or ending poverty by spending money on aid to countries willing to introduce market reforms, Brown would opt for the latter.
Blair is more concerned about international terror, Brown about the world’s starving. Both, of course, abhor both terror and poverty. But consider Brown’s outbreak of parsimony when it comes to military spending, and his open-handedness when it comes to international debt relief and meeting the needs of the poor here and abroad. And everyone with any familiarity with military budgets knows that the hunt for waste massive enough to support a cut in funding with no reduction in capability is engaged in only by politicians who view almost all military expenditures as money diverted from more worthwhile projects.
Brown intends to create a Britain that is both richer and fairer than the one he will inherit. And who will be his chancellor on this journey? Ed Balls, his long time economic adviser is set to become a Labour MP at the next election, and is one of the few people who can stand up to him in argument. Becoming chancellor after less than three years in parliament would be a bit unorthodox, but why not?
In deciding whether a Brown premiership will serve Britain well, it is important to keep in mind his ability to absorb new ideas, and the fact that he has so far delivered an unprecedented run of prosperity.