CentrePiece Summer 2007
The economy is probably the most successful legacy of
the Blair years. Ironically, New Labour’s economic policies
have been set by his heir, Chancellor Gordon Brown.
Britain has enjoyed 15 years of continuous growth
combined with low inflation. The labour market has
absorbed a large number of new entrants, especially from
the wave of migration from Eastern Europe, yet
unemployment has remained at historically low levels.
Even on the Achilles’ heel of productivity, Britain has
narrowed the gap with her major competitors and kept
up with the American productivity miracle.
So why does Labour have trouble converting these
economic gains into the political currency of popularity?
Leaving Iraq aside, forgetfulness, fiscal policy and fairness
are the main reasons.
First, the public appears now to take economic prosperity
for granted. People seem more likely to give credit for
success to the Thatcher reforms, to the Bank of England,
to being outside the euro or to cheap Chinese imports
than to the government. With the exception of
globalisation, however, these
were policy choices of the
government. Independence of
the Bank was a bold and
successful early move. Overall,
Labour has accepted the
importance of competitive
markets and labour market
flexibility for economic success.
Second, Labour has
significantly raised tax as a
share of national income and
spent the money on public
services. ‘Tax and spend’ is
exactly what socialist governments are supposed to do,
of course, but unlike previous Labour governments,
neither Blair nor Brown have boasted about it. Nor have
they overspent in the early years of power only to be
forced by circumstances to cut back and increase taxes in
later years (as happened most notoriously in 1976 when
the then Labour Chancellor, Denis Healey, had to turn to
the International Monetary Fund).
The government’s problem is that the public expects
greater improvements in hospitals, schools and policing
from their tax pounds than they have seen. It also