The MT Diary

Waiting for Brown's apologia; UK's woes delight eurocrats; avoiding Rock in the Ionian.

by Howard Davies
Last Updated: 31 Aug 2010

In 1988, Nigel Lawson's reputation was at its apogee. Margaret Thatcher memorably described him as 'unassailable'. So it was with Gordon Brown in early 2007. But what a falling off was there. Now, Brown can do no right. His opinion poll ratings plumb new depths. In 1989, of course, Lawson left office abruptly, and went on to write one of the best books about British politics of the past 50 years, The View from No.11 (Bantam, 1992). It was also, understandably, an apologia pro vita sua.

It's still not clear whether ex-chancellor Brown will soon have the leisure to devote to his own memoirs, though the betting must be that he will be free after an election in the summer of 2010, at the latest. If and when he does, what will he have to say in his own defence?

At the moment, 'people familiar with the matter', as the American newspapers describe them, say there is a clear and fierce narrative under preparation. According to the current version, all Brown's misfortunes and more may be laid at the door of one person alone: his dreaded predecessor, Tony Blair. Brown himself has done nothing wrong whatsoever.

The war was, as he always said, a mistake, and a very costly one at that. The public sector reforms were bungled, leaving Labour vulnerable to the Tories on its stewardship of the NHS, and on the school system. Worse, Blair delayed his departure until just the moment when the financial markets and the world economy began to turn nasty, leaving Brown with no calm water in which to establish his own reputation as a steady hand on the tiller.

The problem with this line is that it's hard to reconcile that explanation of the transition and the inheritance with the notion, sedulously promoted by the Brownites for the previous decade, that Brown was the de facto managing director of the government, while Blair was merely the de jure non-executive chairman. So there are few buyers for this storyline even now, and by 2010 a 'blame Blair' strategy will be threadbare.

What, then, is Plan B? One argument for the Brown defence will certainly be that the financial crisis could not have been foreseen and was of exceptional severity. The second half of the point is undoubtedly true; the first half less clearly so. Economists at the Bank for International Settlements in Basel and elsewhere argued that the asset price boom was so extreme that it was bound to end in tears, and that central banks and governments should 'lean against the wind' and try to reduce the euphoria through monetary or fiscal policy.

The arch-opponent of this line was Alan Greenspan, long Brown's greatest hero in the financial world. The authorities had no business, in his view, trying to spoil the party. Their role is to mop up after the bubble has burst.

From a purely central banking point of view, it is certainly hard to spot a price bubble in advance. But, politically, a mopping-up strategy is a highly unattractive posture. Even though the mops and squeegees were officially handed over to Alistair Darling last year, the Great British Public has not been fooled. Mrs Mop is to be found in Number 10, as far as they're concerned.

How do things look from overseas? I spent a couple of hot summer days in Frankfurt recently, to see how London looks from there. Frankfurt has never been close to the top of my holiday destination list, but the river banks of the Main have scrubbed up nicely, with a kind of urban beach and a Museum Mile on one side (well, a Museum 400 Metres, perhaps), which is worth a Michelin star. On the terrace of the Holbein restaurant in the Stadel Museum (highly recommended), after three types of herring and a generous helping of what was called herb piglet, I surveyed the scene with some eurofolk.

As it happens, Slovakia had just been given the green light to join the single currency. So although the question may be theoretical from a political point of view, we contemplated the position of the UK, were it a candidate country. It doesn't look good. We are now formally in the excessive deficit procedure, which the Commission invokes when public borrowing is out of line. The sterling exchange rate has been in free fall against the euro, down almost 20% in the past year. So we would not have a prayer if we wanted to join, whereas Cyprus and Malta are already in, and Lithuania may well qualify soon.

The eurocrats and eurobankers are too polite to put it in so many words, but the British rhetoric - the Government's oft-repeated claims that it had put an end to boom and bust, for the superiority of our monetary arrangements and our leading-edge regulatory system - now looks a touch threadbare on the mainland. Are they upset? Schadenfreude doesn't quite capture the flavour of the glee over the gluhwein.

And so to a brief boating break: an idle interlude in the Ionian Sea. Our craft is kept in Corfu, but we sailed straight south and moored momentarily in Mourtos before parking in peaceful Paxos, where no-one knows about Northern Rock.

While the summer sun shone and the resinated retsina made for restful afternoons, it was easy to expunge the excesses of the financial markets from one's mind, and take refuge in pointless alliteration. Normal service will be resumed in September, if the breezes blow us back.

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