Gordon Brown

Gordon Brown, then Chancellor of the Exchequer, at a Commonwealth Finance Ministers Press Conference in 2004

Gordon Brown was the principal intellectual architect of the transformation of the United Kingdom's Labour Party from a moderately socialist party into an explicitly market-oriented social democratic party. Then, as the country's longest-serving Chancellor of the Exchequer he made major changes to its system of economic and financial management, and resisted pressures to join the European Monetary Union. Subsequently, as Prime Minister, he took the lead in the international response to the financial crash of 2008 and managed the United Kingdom's recovery from the recession of 2009. After the Labour Party's defeat in the general election of 2010, he resigned from its leadership and returned to the opposition back benches as Member of Parliament for a Scottish constituency.

Parliamentary career

Overview

In opposition, Gordon Brown, devoted himself to the consideration of ways in which current economic thinking could be applied to the management of the United Kingdom economy, and when he became Chancellor of the Exchequer in 1997, he introduced major changes to the conduct of the country's monetary and fiscal policies. His monetary policy was targeted directly upon the control of inflation, the stated purpose of his fiscal policy was the maintenance of economic stability, and his public expenditure plans included major increases in spending on health and education. His management of the economy was generally considered at the time to have been successful, and he enjoyed positive opinion poll ratings throughout his time as Chancellor. He became Prime Minister of the United Kingdom in 2007 and, after his initially well-received response to the financial crash of 2008, he rapidly lost popularity, mainly as a result of being held partly responsible for the country's recession of 2009 and its subsequent financial problems, By 2010 his opinion poll ratings had fallen to the lowest level experienced by a British Prime Minister, and he ceased to be Prime Minister after his government's defeat in the general election of May 2010.

Introduction: New Labour

"... markets are part of advancing the public interest and the left are wrong to say they are not; ...markets are not always in the public interest and the right is wrong to automatically equate the imposition of markets with the public interest." "The challenge for New Labour is, while remaining true to our values and goals, to have the courage to affirm that markets are a means of advancing the public interest; to strengthen markets when they work and to tackle market failures to enable markets to work better." (Gordon Brown's speech to the Social Market Foundation on 3 February, 2003).

When Gordon Brown became a Labour Member of Parliament in 1983, a battle was raging between the party's parliamentary leaders and its grass-roots activists. The leadership had largely abandoned its earlier policy of nationalisation in the course of the 1970s, but the party's constitution still contained a clause that committed it to comprehensive nationalisation, and its re-adoption as an active policy was vigorously sought by the self-styled Militant Tendency that regarded market capitalism as an instrument of oppression. The reforming zeal of party leader Neil Kinnock, and his successor, John Smith, gradually prevailed over the party's militant minority, but Gordon Brown urged them to go further in modernising its policies. He and the like-minded Tony Blair were influenced by the Third Way advocacy of Anthony Giddens at the London School of Economics, and the communitarian thinking of Amitai Etzioni at George Washington University in the United States.

Gordon Brown and Tony Blair as prophet and evangelist together created New Labour as a party that had retained its traditions, but abandoned its former ideology: giving priority to growth over redistribution or wealth, and advocating the market system as a the key to growth. Their 1997 election manifesto was to say that "New Labour is a party of ideas and ideals but not of outdated ideology. What counts is what works", and contained no proposals to reverse their opponents extensive privatisation and deregulation measures. That approach may have marked an end to the left/right divide in the United Kingdom's politics that, in the past, had resulted in a major policy swing with every change of government.

Opposition, 1983-97

"He was ... the most impressive young MP I ever met — erudite, eloquent, intellectual, unassuming, industrious and, most important of all, clear and certain about the better society he hoped to see. He was, in every political way but one, the superior member of the Brown-Blair partnership. The exception was charm." (Roy Hattersley, writing in The Times, May 11, 2010) "He taught me the essence of how to put my arguments across" (Tony Blair interview - see Anthony Seldon: Blair,p269, Free Press,2004)

Although they had little else in common, the new MPs, Gordon Brown and Tony Blair, were high-fliers who had a shared conviction that they could create an electable Labour Party and then a high-achieving Labour government. They shared an office in the 1980s and were seen by their fellow-MPs as an inseparable team. Their campaign to change the party was joined in 1987 by Peter Mandelson (then the party's Director of Campaigns and Communications and later to become a Member of Parliament himself). The changes that they brought about over the following ten years were eventually to be reflected in the party's 1997 election manifesto - changes that were designed to overcome voters' misgivings about the party's ideology as well as presenting an attractive programme of reform.

The first of the major rejections of the party's once-cherished doctrines was the formal abandonment of industrial nationalisation (as reflected in the revision of Clause IV of the party's constitution), and a tacit acceptance of all of the previous administration's deregulation measures. Secondly, there was an explicit undertaking not to repeal the Conservative government's industrial relations legislation - which had outlawed the closed shop (union shop), secondary action (strikes in support of another union's dispute), and strikes called by union officials without first balloting their members. Thirdly and fourthly, the party's policy of unilateral nuclear disarmament was abandoned, and its traditional aversion to the European Union was reversed.

Among New Labour's positive objectives the highest priority was given to an increase in educational standards by raising the level of investment, reducing class sizes and closing failing schools, and it was also considered important to increase investment in the National Health Service. It was considered essential, however, to dispel the popular impression that the election of a Labour government would lead to big increases in taxation, public expenditure and budget deficits. There was an undertaking not to increase the basic or higher tax rates, and initially to accept the previous government's public spending plans, as well as proposal to confine government borrowing to the financing of investment.

According to Anthony Seldon, Tony Blair's biographer, Gordon Brown had been the star of the 1983 intake of Labour Members of Parliament, and his leadership had been acknowledged by Tony Blair and others throughout the rest of the 1980s. By the time of John Smith's death in 1994, however, Tony Blair had become the more popular among Labour Members of Parliament and with the public (and, in a MORI opinion poll Tony Blair scored 32 percent against Gordon Brown's 9 per cent). That much is relatively uncontroversial, but there have been many conflicting accounts of the relations between them in the following months. It is an established fact that Gordon Brown did not stand for election to the Labour party leadership and a consensus that he obtained, in return, promise of untramelled control of economic policy as Chancellor of the Exchequer in the next Labour Government.

Tony Blair was duly elected leader of the Labour Party in 1994 and, in the General Election of 1997, the Labour Party won a sweeping victory over its Conservative opponents.

Chancellor of the Exchequer, 1997-2007

Overview

"The Chancellor... is without peer among the world's economic policy makers. (Alan Greenspan, Chairman of the United States Federal Reserve Board, 14 December 2005)

On becoming Chancellor, Gordon Brown introduced two fundamental changes to the conduct of economic policy. On monetary policy, he replaced the existing money supply target with an inflation target and delegated responsibility for its operation to the Bank of England. On fiscal policy, he announced the adoption of the Code for Fiscal Stability which would limit its conduct by the adoption of two rules: the golden rule - that over the economic cycle, the government would borrow only to invest and not for public consumption; and the sustainable investment rule - that, over the economic cycle, the government would ensure the level of the national debt as a proportion of national income would be held at a "stable and prudent level" (subsequently interpreted as up to 40 per cent of GDP). He also announced the entry criteria that would be used to decide the question of the United Kingdom's membership of the forthcoming European Monetary Union. He subsequently announced major increases in public expenditure mainly to increase investment and staffing levels in schools and hospitals. His tax and benefit changes benefited poorer households at the expense of richer ones, but the incomes of the richest households nevertheless grew more than those of the poorest, and there was a slight rise in income inequality. By the onset of the crisis of 2007, he had reduced the budget deficit to slightly below the level it inherited from his predecessor, and was using more of it finance investment rather than consumption. He had also reduced the national debt to below its previous level. In accordance with the "golden rule", all of his borrowing over the period 1997–98 to 2006–07 had been used for investment.

Gordon Brown was the United Kingdom's longest-serving Chancellor of the Exchequer and opinion poll reports indicate that he retained the confidence of the British people throughout his tenure of that office

The first term: 1997-2001

In his first term as Chancellor, Gordon Brown used fiscal policy to relieve poverty and reduce unemployment - and did so without increasing borrowing. The centrepiece of his first budget was a welfare-to-work scheme designed to help the young and long-term unemployed back into work, financed by a one-off tax on the privatised utilities. In his budget speech,, he presented a five-year plan aimed at reducing the structural budget deficit, and reaffirmed his intention to adhere for two years to his predecessor's public spending programme. In his 1999 budget he replaced the existing family support system with the more ambitious Working Families Tax Credit to support low-income families with children, and to encourage participation in the labour market by increasing the financial rewards from working. Other fiscal measures in his first term included reductions in business tax rates, the introduction of a climate change levy, an increase in the stamp duty on house purchase, and the abolition of the MIRAS (Mortgage Interest Relief At Source) subsidy on house purchase. The net effect of the tax and benefit changes during the first Labour government was a transfer in favour of the poor in which the income of those in the lowest two income deciles increased by about 8 per cent

By the end of his first term in office he was able to announce that the budget balance had been converted from the deficit of 2.4 per cent of national income that he had inherited from his predecessor, to a surplus of 2.4 per cent in 2000-01, and that the national debt had been reduced from 42.5 per cent of GDP in 1996–97 to 30.7 per cent in 2000–01.

Second and third terms 2001-2007

In his second term as Chancellor of the Exchequer, Gordon turned his attention to the objectives of raising the standards of publicly-provided health services and education. He raised the (inflation-corrected) annual growth rate of spending on public services over the period 1997 to 2008, to 4.6 per cent from its previous (1979-97) level of 0.7 per cent, including an increase in health spending to 6.3 per cent from its previous rate of 3.2 per cent, and an increase in education spending to 4.3 per cent from its previous rate of 1.5 per cent . He also increased the growth of defence spending, and maintained the previous growth rate of spending on public order and safety. He did not match those spending increases with commensurate tax increases, and the current budget balance moved from its 2000-01 surplus of 2.4 of national income to a deficit of 0.3% of national income by 2007–08, and the national debt increased to 36.5 per cent of national income.

Under his leadership, each of the Treasury's assessments indicated that the criterion for the country's membership of the European Monetary Union had not been met. '

Prime Minister 2007-2010

The first two years of Gordon Brown's premiership were dominated by the developing financial crash of 2008. The first signs of its impending impact on the United Kingdom came towards the end of 2007 when it emerged that many of its banks had suffered serious losses as a result of their involvement in the subprime mortgage crisis. Commentators forecast a more severe downturn in the UK economy than in the other countries that were affected (because of its larger financial sector and its exceptionally large level of household debt), together with a larger increase in its budget deficit as a result of falling tax revenues from its financial and property sectors.

"...the Brown government has shown itself willing to think clearly about the financial crisis, and act quickly on its conclusions. And this combination of clarity and decisiveness hasn’t been matched by any other Western government, least of all our own." (Paul Krugman writing in the New York Times of 12 October 2008[4])

The full extent of the crash did not develop until September 2008 when the failure of the Lehman Brothers investment bank led to a banking panic that was so severe as to threaten the collapse of the international financial system. Gordon Brown responded in October with a recapitalisation plan for the banks together with an unlimited guarantee on their deposits . The Conservative opposition party supported Gordon Brown's recapitalisation plan, but at the same time they launched an attack on his economic policies which, they argued, had made a major contribution to the severity of the crisis. That accusation was considered to be justified by most of the British press, and his public spending when Chancellor was widely referred to as "profligate". It came to be accepted by the public and was probably among the reasons for the progressive decline in his opinion poll ratings that started at that time.

"You presided over the biggest economic disaster of our lifetime and we will not let you forget it." (George Osborne, then Shadow Chancellor, October 13 2008[5]) " The complete and utter failure of their economic record has never been more clear to see" (David Cameron, then Leader of the Opposition, 17 October 2008 [6]) "Our debt crisis is ... the result of reckless spending" (Kenneth Clarke, former Chancellor of the Exchequer, 6 October 2009[7])

Brown's conference speech made reference to both domestic and international tests he had faced in his new office. These included the return of foot and mouth disease to the UK countryside, and the avoidance of terrorist attacks in London and Glasgow. He presented domestic proposals to create more home ownership, crack down on crime through extending stop and search powers, clean up hospitals, and suggested that permitting the serving of alcohol for 24 hours a day could be reviewed. Internationally, he pledged that British forces would remain in Afghanistan and Iraq, and also highlighted Darfur as a foreign policy priority. His reference to "British jobs for British workers" was criticised by the Conservatives, who pointed out that such a policy would contravene European Union law. They also demanded that he keep a manifesto pledge to hold a referendum on the draft EU Constitution, claiming that the new EU Treaty is that in another guise.

Personal history

James Gordon Brown was born in Govan, Glasgow and raised in Kirkcaldy, Scotland by his parents, John and Elizabeth.