ANALYSIS:Voters are likely to be much more concerned about the fragile British economy than about the character of Gordon Brown or his rival, writes MARK HENNESSY
GORDON BROWN should have had a good day in Downing Street yesterday: the launch of Labour’s manifesto-in-waiting in Coventry on Saturday had gone well, while a Sunday newspaper poll showed Labour closing on the Tories, with the British general election now just weeks away.
However, it was not to be. Brown and his team, instead, spent the day denying allegations that he had hit and physically threatened his staff, particularly the lower-ranking ones, made by Observerjournalist Andrew Rawnsley in his book on the years of Labour domination.
It is the perfect Westminster story, full of personal intrigue, bile and appalling conduct. While it is not clear if every detail of Rawnsley’s allegations is correct, the core is a long-established fact around Whitehall: Gordon Brown is a very difficult man to work for.
So, now, the British public is faced with the Jekyll and Hyde elements of Brown’s personality: one who can go close to crying over the loss of a beloved daughter on television, to a man forced to reject charges that he bullied a low-paid secretary in Downing Street because she did not type fast enough for him.
Will they care? Have they already made their judgment upon him, and his challenger, David Cameron? The British public will soon have bigger things to worry about, once the inevitable spending cuts after the election – regardless of which party wins – begin to bite.
Last Thursday’s news that the UK had to borrow in January – usually a month when tax coffers are filled in advance of a payment deadline for businesses and the self-employed – scared many, and raised fears it will struggle to stay inside the already-gargantuan £178 billion borrowing limit set for the year to April.
The rising cost of meeting the UK’s borrowing debts is now clear. In January 2009, it paid £2.7 billion in interest; last month, it paid £4.2 billion on a current national debt of £846 billion – and interest rates could rise significantly if international lenders get rattled.
Already, the UK is paying 1 per cent more than Germany for debt, while the boost that was offered by the Bank of England’s quantitative easing – where it bought government bonds with money created from nothing – means the treasury will have to find new buyers for tens of billions worth of bonds next year.
Labour is betting all that economic growth, poor and all that it is, will continue in the months ahead, though there are increasing fears that the UK is heading for a “double-dip” recession – with little, if anything, left in the tank to offer a second stimulus. Equally, chancellor Alistair Darling is betting that 2.75 per cent plus a year growth in the years afterwards will mean the spending-cut knife will have to go deep, but, perhaps, not into the bone. However, neither he, nor his likely replacement, Conservative George Osborne, can expect to be that lucky.
Growth is likely to be a full percentage point lower, the highly regarded Institute of Fiscal Studies (IFS) has estimated, while unemployment could run to 9 per cent, and not the 6 per cent predicted by the treasury.
The recession has blown a permanent £73 billion-a-year hole in British national income, and a further £50 billion could yet have to be written off, while £77 billion will have to be cut from public spending to deal with “the permanent increase in borrowing the treasury believes has been caused by the crisis”, said the IFS.
Labour’s spending cuts plan – more cautious than the one favoured by Osborne – predicts a freeze in real terms in public spending from 2011 to 2015, though debt interest and social security payments will continue to rise, unless Ireland’s decision to cut welfare rates is copied.
According to the IFS, the UK is on its way to the “first five consecutive years of real cuts” since records began to be kept in 1948, while Labour’s decision to ring-fence health, schools and overseas aid up to 2013 means that the National Health Service is in line for its tightest budgets in 60 years. Everything else in the budget, such as defence, higher education, transport and housing, will have to be savaged.
Freezing social security – no one is yet talking about actually cutting rates – from April 2011 would result in significant saving, though it would sharply increase poverty, the economic think tank believes.
Tax increases already announced by Darling will come into force in April with the highest-paid find their tax bills jumping by 13 per cent a year.
Is it any wonder that some Labour MPs describe the election expected in May “as the one to lose”.
Mark Hennessy is London Editor