A History of 20th Century Britain by Andrew Marr

Author:Andrew Marr [Marr, Andrew]
Language: eng
Format: epub
ISBN: 9781447219088
Publisher: Macmillan

Squeeze, Relax: New Labour Economics

The events described so far were all, in different ways, secondary to the transformation of Britain that Blair had promised. Northern Ireland was a crisis needing solving. Scotland and Wales were inherited commitments which did not engage much of the Prime Minister’s time, nor any of his passion. The Dome was also inherited, a sally of optimism and opportunism which went terribly wrong. The death of Diana was one of Macmillan’s ‘events’, brilliantly handled. But none of this was what New Labour was really about. Its intended purpose was a more secure economy, radically better public services and a new deal for the people at the bottom. And much of this was in the lap not of Tony Blair, but of Gordon Brown. The saturnine Chancellor would become a controversial figure later in the government too but his early months in the Treasury were rumbustious, as he overruled mandarins and imposed a new way of governing. Like Blair, Brown had no experience of government and, like Blair, he had run his life in Opposition with a tight team of his own, dominated by his economic adviser (later an MP and Treasury minister) Ed Balls. Relations between Team Brown and the Treasury officials began badly and stayed frosty for a long time, rather as other civil service bosses resented the arrival of the rule of special advisers at Number Ten.

Brown’s handing of interest rate control to the Bank of England was a theatrical coup, planned secretly in Opposition and unleashed to widespread astonishment immediately New Labour won. Other countries, including Germany and the United States, had long run monetary policy independently of politicians, but this was an unexpected step for a left-of-centre British Chancellor. It turned out to be particularly helpful to Labour ministers since it removed at a stroke the old suspicion that they would favour high employment over low inflation. It reassured the money markets that Brown would not (because he could not) debauch the currency. In a curious way this gave him more freedom to tax and spend. As one of Brown’s biographers put it, he ‘could only give expression to his socialist instincts after playing the role of uber-guardian of the capitalist system’.10 The Bank move has gone down as one of the clearest achievements of the New Labour era – tellingly, like the devolution referendums, actions taken immediately after winning power. Brown also stripped the Bank of England of its old job of overseeing the rest of the banking sector. If it was worried about the health of commercial banks but also in sole charge of interest rates, the two functions might conflict. His speed in doing so infuriated the Bank’s governor Eddie George who came close to resigning and so spoiling Brown’s early period as Chancellor.

Labour won an early reputation for being economically trustworthy. Brown was the granite-and-iron Chancellor. Then a bachelor, his only mistress was the pinched-cheeked, pursed-mouthed Prudence. Income tax rates did not move. The middle classes could relax and feel free to vote Labour a second time, as they duly did in their droves in 2001.

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