Tonight:
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House prices fell again last week, just days after the Prime Minister ostentatiously announced plans to stabilise the market.
Oil prices fell last week, too, but the oil companies have so far batted off all calls to bring the price down at the petrol pumps.
And electricity prices keep going up as the utility companies, mostly foreign owned, show they are more than willing to call the Government's bluff over whether it has the nerve to impose a windfall tax.
For a man who proudly announced just a few years ago that he had tamed the business cycle and abolished boom and bust, Gordon Brown now seems to exert very little sway over the economy.
This powerlessness is not simply economic: it adds up to a huge political problem for him too.
In times of uncertainty such as these, people look to governments to protect them. This is even more the case when it is so long since the last serious recession that most people under 40 have no real recollection of one.
Given that they have no personal experience of falling house prices, they are far more alarmed by the prospect than they perhaps should be. Certainly they crave reassurance.
If governments are wise they make sure that the public realises how limited their powers are and how little in practical terms they can achieve, by not making overblown claims when things are going well.
The need for such modesty is particularly urgent when, as now, the economic storms are coming in from overseas. But the true political skill is to disguise this lack of real power by creating a semblance of it, largely through appearing to be calm and in control. If voters think they are in safe hands, they are less likely to be troubled even if the ride does get bumpy.
For Brown this presents a double problem. Rousing leadership is not his thing: he finds it hard to reassure. But at the same time, because of his past boasts, people expect something of substance from him. It is Brown's misfortune — though also his own fault — that he tried to persuade the country that he was responsible for the 10 years of growth that followed Labour coming to power in 1997. People not unnaturally now think that if he could fix things on the way up, he ought to be able to fix things on the way down.
The further irony is that he would have been better equipped to mitigate the slowdown had he not come to believe his own spin in the good times. In his later years as Chancellor, as growth piled upon growth, he became ever more confident that he could keep it going indefinitely.
He insisted he was right and his critics were wrong when they said that spending was running out of control and taxes were being driven too high.
In fairness, these critics weakened their case by crying wolf too early — but he wasn't listening anyway, and when the wolf really did come, in the shape of the current downturn, the Government was utterly unprepared. It arguably still is. Brown's previous recklessness now severely limits his room for manoeuvre.
The downturn has already caused a sharp drop in expected tax revenues, a big increase in demands for spending and an alarming deterioration in government finances. Thus now, when he really does need to be able to inject some spending power to boost a flagging economy and offset some of the impact of high interest rates, he finds his coffers are empty.
In these circumstances it is only money that can make a real difference — and that is what he doesn't have. Brown will never admit it, but there is real substance in those Tory jibes that he should have fixed the roof when the sun was shining — the more so as his famous but now discredited golden rule was supposed to curb his spending and impose precisely that discipline. It comes as no surprise that the Chancellor is now said to be considering temporarily suspending Brown's golden rule.
Shorn of the ability to do something meaningful — but not daring to do nothing — the Prime Minister has taken refuge in gestures like last week's housing and energy initiatives and today's warm words on manufacturing, which, while not wholly empty, inevitably fall well short of what is needed. Indeed, he seems perversely unable to realise that such actions can actually make things worse if their all-too-evident feebleness causes a further erosion of confidence.
Ten and possibly even five years ago, people would have believed him when he said such measures would deliver. Not any more. These days people instantly see through the spin. They know the emperor has no clothes and now just long for him to stop pretending.
But what ought to alarm Brown even more is that his impotence is also making people doubt the substance of his original claims to economic competence. These days there is no shortage of economists who argue — admittedly with hindsight — that the much-heralded Labour boom was largely a myth.
They point out that while growth was uninterrupted by downturns for a decade, it was nevertheless weaker than it had been in previous cycles.
They note that much of the success in curbing inflation was a result of cheap imports of clothing and electricals from China, for which he can take no credit, just as the consequent higher demand for oil and raw materials from that same country is now having the opposite effect on prices.
Most damning of all, they point out that people's incomes — outside those who work in finance — have moved up very little during Labour's years in power.
The feeling of increased prosperity was largely an illusion created by rising property prices and the ability to pile on debt. It was not generally backed by big increases in salaries.
During Brown's decade at No 11 Downing Street, people felt times were good not because the economy had been transformed, as Brown claimed, but because they were drawing on their housing wealth to spend 105 per cent of what they earned.
Now house prices are falling, that process has gone into reverse — and it is payback time. If that is painful for the people, it is potentially disastrous for the strangely powerless figure of the Prime Minister.
Reader views (5)
Correct me if I am wrong but I am sure Mr Brown may have said once or twice "An end to boom and bust".
Gordon - "You're Fired"
- M Spanner, Ilford, 09/09/2008 09:32
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Nigel, from Wimbledon has hit the nail family and squarely on the head.
It is to be hoped that the electorate will remember the past 11 years with total clarity when they next are called upon to elect a new government
- J R J, Glen Vine, 09/09/2008 08:50
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Brown's a socialist through and through. Spend, spend, spend -- and save nothing for a rainy day. The U.K. is going to suffer far worse than other states because of his recklessness.
- Phil Jones, London UK, 08/09/2008 12:55
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Basically Brown took the Tory legacy in the economy and has squandered it on worthless initiatives,red tape,expensive borrowing and bureaucracy. Now when trouble arrives there is nothing saved to help, so he blames the rest of the world.
The Romans had a saying"when at peace,prepare for war",Nulabour,Blair and Brown did not prepare....
- Nigel, wimbledon, 08/09/2008 12:20
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Frankly I don't blame Brown for his claims of omnipotence. He is after all, merely a vain and more than normally stupid politician. I blame the likes of you for giving him the credit for growth when it has been clear to me and many others for a decade that it has been an illusion along the lines that you belatedly acknowledge.
Where was your criticism when it was needed, ie before the credit and housing bubbles were created? I suspect you were busy counting your new wealth as well along with all the other people suspending their belief. Hindsight is perfect and useless. Foresight has value which virtually no centre or centre-left commentator cared to exercise despite the clear lessons of history.
- Ralgeol, Singapore, 08/09/2008 12:06
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