Blair's secret weapon: Brown's record
By CNN's Charles Hodson
LONDON, England (CNN) -- In classical mythology, the giant Atlas had the task of bearing the heavens on his shoulders -- a task requiring not only heavy lifting but also a finely tuned sense of balance.
The task of Chancellor Gordon Brown since 1997 has been equally demanding: a delicate balancing act requiring the kind of clout found only in true political heavyweights.
From the start he faced a fourfold challenge: fund the huge increases in health and education spending to which Labour was and remains committed; banish the party's old "tax-and-spend" image; earn the trust of business; and not mess up the economy along the way.
Eight years later, he feels he's done rather well, trumpeting his success keeping interest rates, unemployment and inflation low.
"Britain has not only avoided recession," he told the party faithful as the election campaign began, "but it has continued to grow in quarter after quarter, year after year, in all eight years of our government, enjoying the longest period of sustained growth for 300 years."
Give or take that last piece of historical hyperbole, independent think tanks give Brown a glowing report card.
The National Institute of Economic and Social Research (NIESR) says annual economic growth has averaged 2.4 percent. That is "at least in part because the Labour Party hasn't done anything that's rocked the boat," Martin Wheale, director of the institute, told CNN.
Even Brown's political opponents say his first move as chancellor was his best, and one certain to give him a place in UK economic history. Within days of Labour's election victory he announced that the Bank of England was to set interest rates on its own, without reference to the government.
The Liberal Democrats' Treasury spokesman Vincent Cable even forgives Brown for unashamedly borrowing what had long been Lib-Dem policy: "We've had good economic stability in the UK and steady growth, and much of this is down to that decision."
The main opposition party, the Conservatives, agree that having an independent central bank has brought greater economic stability. What irritates them is the claim that Labour has run public finances well: they take issue with the widespread perception that Brown, a Scottish clergyman's son who married only halfway through his term of office, was in fact wedded to "Prudence."
Prudence has certainly been a word much used in successive Budget speeches since 1997. The chancellor insisted from the start on his so-called "Golden Rule" that over the economic cycle the government should borrow only to invest, and told Parliament just before the election that he was on course to meet that target.
But the last Conservative chancellor, Kenneth Clarke, said in a recent article in the Guardian newspaper that he left Britain's economy and public finances in excellent condition, but Brown "has squandered the incredibly strong fiscal position of the late 1990s ... the tax burden is heading for its highest level in 25 years."
The record certainly shows a widening fiscal deficit. According to Britain's Office for National Statistic, public sector net borrowing rose from £6.6 billion (about $10 billion) in Brown's first fiscal year as chancellor to some £34.5 billion in the last fiscal year -- more than five times higher, albeit under far less buoyant economic circumstances.
George Osborne, a senior Conservative spokesman on the economy, tells CNN a million manufacturing jobs have been lost under Brown's economic stewardship. "Taxes have gone up, spending has gone up, waste of government money has vastly increased, and I think people will say he frittered away a very strong economic inheritance."
Whoever occupies the chancellor's official residence next door to the prime minister's office in Downing Street will face a challenging economic outlook. House prices tripled under Labour, but are now stuck in the doldrums. Consumer spending has been buoyed up by Britons' appetite for personal debt -- they borrowed nearly $30 billion last year, twice as much as in 2003 -- but retail sales data for April showed the sharpest decline in 13 years.
Add in high oil prices and a flagging global economy, and opposition parties say Britain is entering a slowdown in which Brown's forecasts for the economy and for tax receipts look over-optimistic.
The Liberal Democrats' Vincent Cable concedes the government can borrow through a recession but "put on top of an underlying structural deficit one can see that these "golden years" are rapidly becoming a serious problem."
The experts, too, are wondering if Brown and his team are engaging in wishful thinking. Carl Emmerson, deputy director of Britain's Institute of Fiscal Studies, says tax revenues will grow "very strongly" over the next few years, but not as strongly as the Treasury expects.
"If we're right, and the Treasury is wrong, that means that new tax raising measures worth about £11 billion would need to be introduced to get the tax burden up to the level the Treasury is looking for."
Brown strongly rejects the idea that a third Labour term will bring tax hikes, but even his think-tank admirers shake their heads at his forecasts. The NIESR's Wheale of joins the opposition parties in expecting tax increases "on the scale of roughly 2p on the pound in income tax, or slightly more."
The Conservatives, though, believe that if elected they could actually hand back a little to taxpayers by scaling back on the pace of growth of health and education spending. "We've set out to do that precisely to avoid the substantial tax increases that are coming this way if Labour's elected," says the Conservative's Osborne.
Brown doubts that pitch will appeal to voters. "If you value it, vote for it" is Labour's new campaign slogan, and the chancellor lists the achievements of his party's eight years in power: stability, employment, a better health service, and better education. "I don't think anybody who's wanting to achieve these things in the next Parliament wants to see them put at risk," he says.
By implication, he accuses the Conservatives of jeopardizing those cherished goals. His critics, though, say the biggest threat comes from the storm clouds now gathering over the UK economy, and Britain's electors are in for unwelcome news on tax or spending -- whoever wins on Thursday.
Charles Hodson is host of CNN International's "World Business Today"
