QUESTION: what does Gordon Brown’s performance as Chancellor tell us about his ability to lead Britain? Answer: that he does not yet understand how to equip his nation to play in the unforgiving game of international competition. Unless he learns, his citizens’ living standards will decline. Look at Germany.

Mr Brown is fond of mogul gettogethers at which he extols the virtues of entrepreneurship, and praises America’s flexible, productive and innovative economy. But he has not fully grasped the pillars on which entrepreneurship and a successful economy rest.

The first of these is freedom for those who work hard and take risks to keep a large part of what they earn. Most people work because they want to earn enough to support their families, take a holiday, and otherwise use their hard-earned money as they choose. And most entrepreneurs risk their homes and careers in the hope of becoming rich.

Unfortunately, Mr Brown, whose personal incentive to work has laudable non-pecuniary roots, has shown that he doesn’t believe that these monetary incentives are necessary for a successful economy. One way or another, he has claimed for the Government an ever-larger portion of what workers and businesses earn. And aims to appropriate even more: he intends a soaring and complex tax burden to take the share of the national income claimed by government past 40 per cent, its highest level in 20 years — and this when many countries are lowering and simplifying taxes.

So, work late, earn a bit more, and turn 40+ per cent of it over to the Government when you earn it, and another 17.5 per cent when you spend it. No one can blame anyone who decides that the net benefit of that extra effort just isn’t worth the trouble. Which may explain why Britain continues to trail in the productivity league tables.

To the disincentive of high taxes add the mounting cost of workplace regulations. Mr Brown blames it all on Brussels. Yet, he supports the EU constitution, which will increase the power of the EU bureaucracy to ensnare business in even more red tape.

The second pillar on which any successful enterprise system rests is the freedom of consumers to decide how to spend what is left of their earnings after tax. Call it choice, a word that sends chills down the Chancellor’s spine when mentioned in connection with healthcare, education and, I suspect, spending on what he regards as frivolities. Consumers send signals when they buy: they tell businessmen how many workers to hire and how much to invest to satisfy their demands. They also tell them when they have outlived their economic usefulness. Successful economies are ones in which consumers are sovereign.

Unfortunately, Mr Brown believes that consumers are not competent to wield such power. They don’t have the information, or the time, or the inclination to choose their hospital, or the school best suited for their children. So the Government must decide for them — a prescription for the waste and inefficiency that characterises government spending in most countries.

The third pillar of an economy capable of improving the living standard of its citizens is a flexible and productive supply side. Mr Brown learnt two lessons on his recent travels: that he must have more money for his war on African poverty, and that he must improve Britain’s ability to compete with China and other emerging countries. The first lesson means higher taxes to redistribute income to Africa; the second lesson means lower taxes to stimulate workers and businessmen to work harder and smarter. Mr Brown is not easily forced to choose; he would have both.

And could, if an increasingly productive economy created sufficient wealth to allow Britain to be generous to the less fortunate while at the same time improving living standards at home. Not likely. At least not if Mr Brown continues to seek the future in his made-in-Scotland rear-view mirror. The education system, which he recognises as a key to the country’s ability to compete successfully in world markets, will not improve until parents have sufficient choice to enable good schools to expand and force bad schools to get better, or close. That, the Chancellor opposes, as he did top-up fees.

Egalitarian instincts of the sort that inform his tax policies will not produce the cash needed by universities to retain top-flight teachers who can turn out students capable of leading Britain’s fight for a top place in the international competition sweepstakes.

Because the Chancellor is convinced that government not only knows best, but is capable of managing things to produce what is best, he learnedt the wrong lessons from his visit to China. Instead of seeing that China’s success results from its decision to unleash the energies of its people by relaxing some central controls, he came away convinced that more government is required to match China’s performance. So we get government-sponsored design centres, rather than lower taxes to encourage designers to work harder and take chances.

The hard fact is that Britain will not be able to compete in the new world if Mr Brown is in a position to fulfil his wish list: claim an ever-increasing role for government; expand the public sector to the point where it siphons even more resources from the more productive private sector; save Africa; save the environment; continue the drive for cradle-to-grave welfare, from bigger Child Trust Funds and all-day nursery care to more means-tested pensions that discourage individual thrift; regulate university fees and admissions policies; extend parental leave; and raise taxes faster than the economy can grow.

Mr Brown is a good man with admirable goals of social justice. But it takes more than good intentions to lead a nation in the hard world of globalised competition. It takes an understanding of the limits of government.

Times Recommends

• Fragility always gets my sympathy vote
• Double it and you get the real jobless total
• Has al-Megrahi paid his council tax?