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From The Times

May 15, 2008

It all looks like Enron government

The 10 U-turn has destroyed the authority of No 10. We have no idea where we are heading

Anatole Kaletsky

What makes Gordon Brown so popular with newspapers and voters? This may seem a strange question to ask when the Prime Minister has just suffered the worst local election defeat since the early 1980s and faced the most humiliating headlines since the collapse of John Major's economic policy on Black Wednesday. But considering just how disastrously Mr Brown's Government has lately been performing, the real surprise about this week's U-turn on taxes has been the mildness of the media and public response.

A prime minister's inability to get his Budget passed by the Commons has traditionally been considered the quintessential resigning issue. And in this case, capitulation on the most important tax measure in two consecutive Budgets was accompanied by Mr Brown's abandonment of his fiscal rules. These were the lodestars of his entire economic programme, as surely the sterling-mark exchange rate was Mr Major's guiding light.

Now that the fiscal rules have been abandoned and the Treasury's main Budget judgments have been opened up to revision by backbenchers, we can have literally no idea of where the Brown Government's economic policy may be heading - and neither can the Chancellor and his Treasury civil servants. This erosion of the Treasury's budgetary function, literally unprecedented in the history of modern British government, sets the stage for economic and political disaster. The Treasury's main job is essentially the same as the finance department's in a well-run company. It must consider the many deserving requests for new projects arriving every day from departmental ministers or line managers and it must above all have the authority to say “no”.

That authority, in turn, depends on two factors: a serious companywide commitment to the budget processes and an ability by the finance director (or Chancellor) to overrule even the chief executive or company chairman (in this case the Prime Minister) when it comes to ensuring the agreed budget is observed. When these conditions break down and the Chancellor loses his authority to say “no” to the Prime Minister, the Government risks becoming like a company run by a domineering chief executive who treats the whole business, including its finances, as a personal fiefdom.

This is essentially what happened in the empires of Robert Maxwell and Conrad Black and, most notoriously at Enron. When the Treasury and chancellor can no longer say “no” to demands from the prime minister for political fixes and wheezes, the country risks Enron government - or, to put it more politely, the rule by pressure groups and lobbies.

After all, if Mr Brown's fiscal rules could be ignored so easily this year to accommodate a £2.7 billion tax cut to satisfy Labour backbenchers, why shouldn't they also be ignored to satisfy fuel-tax protesters and pensioners and underpaid public sector workers and bankers demanding bailouts and homeowners struggling with their mortgages and multinational companies threatening to pull out of Britain and farmers complaining about the weather and indeed you and me, since we would all prefer to pay less tax and get more out of government? In short, this week's U-turn could presage a summer of discontent in which every possible claimant and lobby demands its extra share of taxpayer funds.

To put the same point in a way that may be more understandable to the political manipulator in Mr Brown, if you can suddenly conjure up £2.7 billion from nowhere and tear up your sacrosanct fiscal rules, why shouldn't the Tories do the same? They can now promise big tax cuts combined with improvements in public services, effortlessly financed by extra borrowing.

It may be argued, nevertheless, the fiscal rules now abandoned were arbitrary and foolish in the first place and should never have been accorded the pride of place they enjoyed in the 11 Budgets Mr Brown presented as Chancellor. Indeed, I have repeatedly argued this myself.

But the absence of economic logic behind Mr Brown's rules is irrelevant. The same could be said (and was) of Mr Major's commitment to keep the exchange rate at DM2.95 to the pound, come hell or high water. Yet when this arbitrary economic totem was broken, so was Mr Major's authority. The same must surely now be true of Mr Brown.

Yet far from demanding Mr Brown's immediate resignation or predicting the inevitable demise of his Government, the media have mostly treated this week's U-turn as the moment when the Prime Minister's fortunes could start to recover. The Daily Telegraph headlined its editorial “Right move for wrong reasons” and argued that the Government “deserves congratulations” for its sudden discovery that it could borrow its way out of trouble. The Financial Times described the tax giveaway as an “act of desperation” but nevertheless predicted that “this retreat may turn out to be the moment when the Government fightback began”. The leader in The Times described this mini-budget as a “final service to the Labour Party” by Gwyneth Dunwoody, the Labour MP, whose untimely death triggered the Crewe & Nantwich by-election and encouraged Mr Brown to offer voters this bribe.

So why, I repeat, is everyone suddenly so deferential to the Prime Minister? For overt rightwingers the calculation is fairly simple - the Tories want Mr Brown as their opponent in the 2010 election. For more impartial media commentators, it is also a matter of personal pride. We are all afraid of getting caught up in mass hysteria and anxious to prove our independence. So the very fact that Mr Brown's maladministration has now become so obvious makes it clever and original to imagine possible ways out.

There is an honourable reason for giving Mr Brown the benefit of the doubt. Mr Brown, for all his recent blunders, was a remarkably successful politician until he became Prime Minister.

Indeed, he was probably the most successful chancellor in modern history, notwithstanding his muddled tax reforms, his badly timed gold sales and the fatal damage he allowed the regulators and courts to inflict on Britain's pension funds. Mr Brown made the right decisions on monetary policy and the Bank of England. He kept Britain out of the euro. He reduced capital gains and corporation tax more radically than any Tory chancellor and he resisted populist demands to squeeze the rich.

Above all, Mr Brown allowed the economy to grow rapidly and to benefit from its comparative advantage in global business services without trying to tilt the playing field in favour of Labour's traditional working-class constituencies.

By doing the British economy no serious harm during his long tenure at the Treasury, Mr Brown earned a distinction unique among postwar chancellors, with the possible exception of Kenneth Clarke.

Mr Brown's fatal flaws as Prime Minister have had nothing to do with the statist, socialist, old Labour instincts that his detractors claimed to detect behind the mask of the competent Chancellor. If Mr Brown fails as Prime Minister, it will not be because of his ideology but because of his personality: his failure to delegate, his intolerance of dissent, his indecisiveness, his stubbornness, and his brittleness under stress. In sum, Mr Brown was a great Chancellor but is a terrible Prime Minister. That at least puts him above John Major and James Callaghan, who were terrible at both jobs.

No damage to the economy? Manufacturing has declined to a rump. The trade deficit is huge. The welfare state has expanded to hide millions structurally unemployed. Public spending and borrowing have ballooned, compounded by massive off balance sheet borrowings. Inflation will be the only route out.

andrew harrison, Edinburgh, Scotland

Absolutely spot on: What has defined the Brown government so far is giving in to pressure groups at the first sign of dissent coupled with the flaws of indecisiveness & failure of presentation

ian cheese, london, uk

Staying out of the Euro is handy for our corrupt governments. It allows them to indulge in sloppy 'spend before we earn' practices that have been so typical of the last 50 years in the UK, then inflate/devalue to avoid the consequences. Just what is happening now. The Euro has Germany -very useful.

Colin, shrewsbury,

here, here on almost every point you make - and we don't agree often. but maybe brown's (and our's) economic woes - apart from the international crisis - are because he passed the economic ball to darling and let him run with it? surely it's now ad's head on the block? Lamb and scapegoat, perfect

andy, st albans, uk

Brown was a lucky chancellor. He inherited a good position and didn't ruin it Many of us were pleasantly surprised by the mild way he went about things. But his hubris and pretence at financial rectitude was and is his undoing. Hence this week.

He is however a simply appalling prime minister.

Paul Owen, Birmingham, UK

Martin, Newcastle. Quite right. I could also point out the inconsistencies over the years, but then Mr Kaletsky will be well aware of those himself.

Of course I am mindful that there is a vast difference between opinion based on reality and opinion based on what it will produce by way of income!

Richard Crow, Warsaw, Poland

Brown took an economy with a surplus during a boom and put it drastically into the red. now the economy has taken a turn for the worse and he is panicking because the defecit is going to balloon so fast his head will spin. we are already taxed to death so he has very little room to move, thanks GB

James, London, England

as long as banks control the money and credit we will have this problem.
bank of england is a private bank (yes a private bank) and hence can not and does not act in the interest of this country.

ebbi britt, valencia,

You still write like a plonker: that is my best simile I could think of.
Only time Brown was prudent, is when he followed the Tory spending plans of the first two years.
He has done more damage to the UK economy than any other
Scotsman , in our history.

A Walton, Leicester, England

Brown was not a great chancellor, he was a very lucky one.
Had China not opened up to the world, the past decade would have looked very different.
Browns "success" was in spending previous saving and accruing future debts for short term comfort.
The UK has nothing to show for Browns spending

Dominic, Manchester, UK

The ENRON comparison may well be closer the truth than you think! Production of a 'real' HMG balance sheet would be an eye-opener or all.

Michael, Bridgwater , UK

For the last ten years we've had classic demand-pull inflation caused by an uncontrolled and apparently unmonitored hyper-increase in sterling M3, and mostly expressed in public sector wages and house prices, the latter conveniently excluded from the inflation index. Great management...not.

Mary, London,

I hardly ever bother with Anatole any more...Brown, the most successful Chanceller?! Once again for the slow-witted: he inherited a dynamic, progressive, flexible and solid economy on the verge of sustained global growth and he has left us with wasted trillions, massive debt, inflexibility and pain.

Tim, London,

Brown all but admitted to Humpreys today that the BoE MPC independence was a myth by the use several times of 'WE cut interest rates".

Jonathan Spencer, London, UK

The mild criticism is mostly from the poiltical Right as New Labour has been carrying out policies shared with the Tories. On the Left , New Labour's credibility has collapsed.

Andrew G, London , Uk

I agree with Martin, Newcastle, AK is, or has been a New Lab supporter and is now somewhat exposed: Everyone can see and many will suffer from the results of the "decisions in the long term interests of the country" which G Brown & co have made since taking offce in 1997.

P Heyes, Peterborough,

Total nonsense - Kaletsky actually cites many of Brown's blunders as Chancellor. The best postwar chancellor was Ken Clarke, whose economic legacy Brown inherited. Brown has merely blundered along behind it and squandered it.

Sarah, Telford,

"Indeed, he was probably the most successful chancellor in modern history," Successful at what, exactly? Destroying the economy, yes.

Wen, Oxfordshire,

"In sum, Mr Brown was a great Chancellor but is a terrible Prime Minister. That at least puts him above John Major and James Callaghan, who were terrible at both jobs."

Incorrect - Major won an election in a government well past its sell-by date, quite an ach. Brown is not remotely able to do this

RB, Aberdeen,

GB hasn't learnt anything from the credit crisis. He's like a credit card junky who's reached his limit and can't pay it off. Look at the massive budget deficit. That certainly ain't prudent money management! Solid budget under Ken Clarke, mobile phone licences, UK gold he's spent it all!

Nick, London,

Surely A Thomas, is joking? Of course things were bad when the Tories last took power- Labour had bankrupted the country. Unlike the golden legacy they bequeathed to Brown, the Tories will soon (once again) inherit a ruined economy from Labour and have to dispense the harsh medicine to fix it.

Francis, London, UK

AK is tying himself in knots trying reconcile the obvious wreckage of the country's finances with the praise he has heaped on Brown over the years.

Better to come clean. Brown has dominated domestic policy for 11 years, and look where we are.

Martin, Newcastle,

"Mr.Brown was a great Chancellor" ??? When he could not see the basic mathematical fallacy of abolishing the 10 p. rate. Even his earlier' success was based on dubious mrtgage lending and the housing boom, which denied many people the chance to buy their house.

Dr.S.G.Subbuswamy, Billericay, ESSEX

Actually you cannot have it both ways,and that is why no-one is carping on.There's nothing worse than a driver who has taken a wrong turn refusing to do a U-turn. So for Brown to admit that he got it wrong and to sort it out is not a disaster.It shows he is sensible and listens. And acts!

Iain Kennedy, Glasgow,

Remember this Tories? Tory inflation - 10%+, Tory base rates 15%, Tory unemployment - 4 million, Tory economic policy - smash the unions, kill off the Northern (labour) industrial base, starve schools and hospitals of cash and sod the majority of the country.

No thanks. I'll be voting for Gordon.

A Thomas, Lanchester,

The damage Brown has presided over is so labyrinthine it will take years to untangle and understand his only chance personally is to offer his services to Colombian drug barons as a money launderer!

Jim, Prudhoe, England

'The real surprise about this week's U-turn on taxes has been the mildness of the media and public response...'

Anatole, what planet have you been living on??!!

As to his legacy as Chancellor, that is in tatters too as outlined above. We're merely reaping what he sowed.

William Orenstein, London, England

My small private pension was increased this year, however, because of the 10p tax I now receive LESS each month. Labour will no longer get my vote. Are they not supposed to look after the lower income families of this country?

Jean Denham, Oxford,

Brown was the Chancellor of 'boom' - and now the Prime Minister of 'bust'.

David, Swindon, UK

Gordoin Brown a good Chancellor? he inherited an economy in the black and reduceded it to a £40Bn deficit,and untold off-sheet brrowing. Spare a thought for those 1.1M low earners who haven't been recompensed, How must they feel when they see others who never lost out get the £120?

Jeremiah, London,

david, Essex, rob, derby, uk; David Leslie, Perth, Scotland; and most other contributors.

WELL SPOKEN. BROWN is a b***** menace. Also on Black Wednesday what was the depreciation? Since B was PM the £ has deflated by 15% against the Euro! Deflation was about that against the DM So nothing new

M. Cawdery, Portadown, Co. UK, EU

In fact, the paradigma of the policy-mix, with a government steering a budget and a central bank steering inflation may be endegered, if not already obsolete.
It's not a government that failed.. its a way of life that is coming to an end for policy-makers.

Rui, Lisbon, Portugal

The dragon needs shed it's skin and the last years before rebirth, sleeping on piles of useless treasure, it suffers an agony of piecing swords and arthritic scales.
I thank our leaders for they have taught me a new language of fantasy and the dream time even as old promises die

glenn schaefer, holbrook, usa

Brown a great chancellor?: -Letting UK banks become the weakest capitalised in Europe; -Changing the inflation measure to one thart even more understates increase in cost of living; -Budget deficit in boom times; - Not adressing the public sector pensions funding deficit; -Inflation without Tesco?

Richard Schreuder, The Hague, The Netherlands

He kept Britain out of the euro”. AND THAT IS THE REASON THAT WE ARE IN THIS MESS.

If we had the euro we would now have a strong currency, low interest rates, and low inflation and the government would be obliged to keep its house in order.

Mr Kaletsky needs to change his anti-euro tune.

Peter Goddard, Cheam, England, EU

John Major - a terrible Prime Minister? I hanker back to the days of an honest PM who left the country in a financially sound position and knew better than to waste taxpayers money

Brian donnelly, Newry,

I think GB is a double agent on a mission to:

1) destroy the UK economy
2) bring social unrest

anyone else ever wonder the same thing???...

this may sound a bit far fetched but everything he has done has been to the detriment of this country.....

C Kroustis, London, UK

There were two reason why Brown may have appeared to have been a good Chancellor:
1. He left the control of a large part of the economy to the Bank of England rather than trusting himself with it
2. He was restrained from introducing lunatic measures (like driving out the Non Doms) by Tony Blair

John, LONDON, ENGLAND

Pensions, pensions, my kingdonw for a pension...

It seems now though that where we've all paid NI (that Gordy increased by 10% don't forget) forever, we may now have to pay for a separate insurance policy too.

Get out Gordon. The sooner the better.

Tim, Bristol,

And if anyone looks at manufacturing index over this last decade of 'growth' they will see that it's currently at a lower level than 10 years ago. And this is before the recession!

Growth in the economy is solely due to house price rises and people spending their increased equity!

John Bull, Hull, GBR

Ten years of spending oil revenues on benefits rather than investment. Ten years of pumping up an economy on a sea of debt ?

Pardon ?

Merlin, Northampton, UK

Gordon Brown our economic wiz kid who thought selling off 400 Tons of our gold made good financial sense!

j robert brent , stevenage, England

"The most successful Chancellor in modern history"! Successful at overspending while the economy was still growing so there is no room to borrow now when we need it! Certainly successful at tax reform - the UK overtook India and now has the world's longest tax code. More red tape! Hurrah!

Rowan, Oxford,

Brown presided over the dismantling of pensions schemes whilst of course retaining his own unfunded scheme guaranteed by the tax payer. A great Chancellor? For him, yes. For the public? Come off it Mr Kaletsky - you know better than that.

C Richards, Bristol,

Brown, like Tony Blair is a lackey of the World Banking Cartel. They are in the process of manipulating this World Financial Depression, and literally robbing us all, of all we possess. See "The Money Masters" film on Google. Brown is getting a top score from them.

victor compton, Cherbourg, France

Without an uncritical press, the government could never have persuaded people they were sharing in get-rich-quick Britain. The press helped justify the huge salaries of top civil servants, ex-politicians and financiers. Normal salaries were stagnant and that wealth - house prices and credit cards.

mark howard, Moscow, Russia

"Mr Brown, for all his recent blunders, was a remarkably successful politician until he became Prime Minister."

Easy if you spend money you do not have, not to mention the pensions timebomb! It was all smoke and mirrors. The smoke will rapidly clear in the approaching storm!

Alan, Luton,

This cavalcade of negativity towards a highly capable and responsible party has all the hallmarks of a group of power seeking deceitful distorters.....................Show a bit of maturity occasionally and cut out the vote winning attempted shinnanigans

Eric, Southwick, England

What about the off-balance-cheet accounting, another Enron trick, mirrored faithfully in the absurd PFI schemes?

At least the boss of Enron went to jail for 20 years, and the money he lost was given to him by volunteers (shareholders)

Brown's trillion has been taken from tax payers with no choice

cuffleyburgers, Lucca,

It certainly makes it difficult for Mr.Brown to argue against unfunded tax cuts in the future. He has always derided any party which even intimated cutting tax without detailing how it was to be funded. We now know how to fund them, you borrow it! Nice one Gordon.

Peter, Brixham, Devon

Yeh, he resisted calls to squeeze the rich and squeezed the middle class instead... created thousands (tens of?) of make work jobs with his tax credits...

He's benefited from the benign economic conditions of the last ten years not from any good judgement on his part.

Andy Davies, Glos, UK,

A fenciful analysis of Gordon Brown. If he was so successful a chancellor why we are in a mess now he is gone? One would assume that that goodness created by Gordon Brown would at least last for few months! No it did not. He was simply riding a decade of plenty; any one could have done the job same.

M. A. Jabbar, Altrincham, Cheshire

"Enron Government" I can agree with but as Chancellor he is the worst in living memory having led this country into unprecedented debt whilst allowing real wealth creating capacity to wither on the vine.
Phase 1 Credit Crunch
Phase 2 Sterling crisis
Phase 3 Social unrest
Phase 4 New Government

Steve Marchant, Broadhempston, UK

He achieved those "successes" during a more benign economic period. The real test is how you manage difficult times - cf the performances of those CEOs who went along with the herd, ever more riskily, until their bubbles burst. Once he had style over substance, now he's only a pitiful shadow.

Padraig, Perth, Australia

'Indeed, he was probably the most successful chancellor in modern history'
You have fallen for his spin.He has turn a sound economy left by the tories into an absolute disaster.In politics decisions made today cause effect some time later.We are just seeing the effects of such a succesful chancelor

rob, derby, uk

Brown made up, and changed, his own fiscal 'rules' to suit whatever was happening at that particular time. The public and press saw this for what it was many years ago. These U-turns are just an extension of this, as Brown didn't have then, and doesn't have now, a clue.

David Leslie, Perth, Scotland

now what was it you said....complacent media.easy ride.......best chancellor since when........muddled tax.....robbed pensions....given away gold.....hang on BEST CHANCELLOR.....
HOW MANY SHERBERTS DID YOU HAVE LAST NIGHT........bring on the election NOW

vivian, pego, spain

I really cannot understand how anyone can think that Mr Brown has been our saviour economically over the past ten years. Lets us start with the fact that we have the second largest trade defict in the world today: our PSBR is out of control and we have an economy built on a mountain of debt. Rubbish

Paolo, Manchester,

Chancellor Brown (the modern day William Wallace) has certainly given the country a good thrashing ecconomically if not feudally.

Mike O Connor, plymouth,

"probably the most successful chancellor in modern history"

Over what period?

What about the malign effect his pensions raid is going to have in 20 years time on the income of those who haven't retired yet? What about the massive PFI debt he has lumbered the country with?

david, Essex,

What a ridiculous article, "he was probably the most successful chancellor in modern history, notwithstanding his muddled tax reforms, his badly timed gold sales and the fatal damage he allowed the regulators and courts to inflict on Britain's pension funds". NO HE WASNT! He has ruined the country!

Richard, Plymouth,

Brown did do serious harm to the economy during his long tenure as Chancellor, through his excessive spending ,particularly on expanding the public sector.This is becoming very apparent now that the lean years have arrived.

colin, Hong Kong,

That so many commentators seem to know the best way forward, indicative of the muddle and lack of direction. I may be in a minority of one but to say the BoE is independent is in the realms of fantasy. Monetary but not fiscal, how does that work? Loose targets and control off sounds like gambling.

Malcolm Turner, Alsager, England

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Anatole Kaletsky

Anatole Kaletsky writes for The Times Comment pages on Thursdays. One of the country's leading commentators on economics, he was formerly Economics Editor and is now Editor-at-large of The Times. He has won many awards for his financial and political journalism. Before joining The Times, he worked for 12 years on the Financial Times

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It all looks like Enron government

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