Gordon Brown's best chance of winning the election is to keep warning that the Tories would rein in spending too soon
Warning: what follows will depress you. When Gordon Brown said yesterday that "there are still real risks to the recovery" he was if anything understating the hole the economy is in. As chancellor, Mr Brown was often surprisingly accurate in his economic forecasts (it was the tax revenues he overestimated, but that is another story); yet this rather gloomy prediction – an extraordinary statement to make for a party leader going into a general election – may if anything prove to be not gloomy enough.
Consider a few scraps of recent economic news: over two years of the pound dropping like a stone – and exports in January suffered their worst drop since the summer of 2006. Yes, the medium-term outlook is slightly better – but it is still not healthy. What about the housing market, that traditionally go-go area of the UK economy? Well, the mini-boom of last year appears to have puttered out, going by the recent slide in approvals for mortgages. Again, that may improve – but low interest rates are not working their usual magic (something to do, surely, with the high-street banks not passing on the easy credit they have been getting from Threadneedle Street). Look too at the results from Northern Rock yesterday which indicate that without record-low rates and a lot of forbearance by the mortgage lenders home repossessions would be a lot higher.
As for the rest of the world, in the former powerhouse economy of the US, Wall Street is enjoying more stable banks and a tearaway stockmarket – but the housing market (which is where the global economic crisis began) is in deep trouble. Repossessions are at an all-time high; home sales are plunging (again, despite a record-low Fed funds interest rate) and the house-building industry is on its back. Consumers in Germany have gone awol. One can point to explosive growth in China, and a relatively healthy Indian economy – but these are not major markets for British exports. The brute fact remains that unless and until the western economies pick up, the UK's best hope is to continue on state life support.
The recent spurt of relatively good economic news (the confirmation that the UK is out of recession, a few positive business surveys) may now be followed by a stream of bad tidings as the various bits of fiscal stimulus are suspended and banks continue to be miserly with their loans. For Mr Brown, this means his best chance of winning the election is to keep warning that the Tories would rein in spending too soon and too unfairly and hurt the worst-off. That is broadly true, but Labour should lighten the gloom with some proposals for how it will rebuild a shattered manufacturing base and an economy still too dependent on the City.
Copyright Speakers Corner 2016