How Gordon is gambling his billions

Peter Kellner12 April 2012

GORDON Brown is taking a huge risk with his spending plans for the next three years, lifting public expenditure by £93bn from its current £418bn - but the nature of that risk is rather different to the one for which he is normally criticised. The conventional view is that the economy could trip him up. However, unless Britain stumbles into a full-scale recession, the Chancellor's plans are probably safe.

There are two reasons for this. The first is that Mr Brown bases his public spending plans on deliberately cautious forecasts of economic growth. True, many people regard his Budget-time projections - at least two% growth this year and three% next year - as fanciful. But the Chancellor's forecasts for public finances assume lower growth rates. With a little luck, those forecasts should not go too badly awry.

What if he is unlucky? Here we come to Mr Brown's second safety net. Britain's public finances are in very good shape. A year or two of economic turbulence would briefly drive up borrowing - but from such a low base that, unlike Denis Healey in 1976, Mr Brown need have no fears of the International-Monetary Fund sending in the bailiffs. He could sit tight and wait for the storm to blow over.

No, the biggest risk that the Chancellor is taking is different - and, in a way, more fundamental. It is that, after five years in office, he and Tony Blair are embarking on a huge and politically hazardous social experiment.

During its first term, Labour's paramount need was to establish its reputation for economic competence. To achieve this, public spending was held down for the first three years after 1997. Even so, ministers hoped to achieve some telling improvements in the main public services.

Those hopes were dashed. The Prime Minister and his Chancellor discovered vast amounts of money really were needed to improve Britain's schools, hospitals, roads and trains - and also the task of converting Cabinet-decisions into markedly better services was far tougher and took far longer than they ever realised from the opposition benches.

Today's spending review reflects both of these discoveries. It provides for the biggest sustained increase in spending on the main public services in Britain's history. It also promises radical new ways to make sure the money really does reach the front line. That is not all. Mr Brown is not simply handing more cash to head teachers and hospital managers and saying 'get on with it'. Far more than any previous Chancellor, he is specifying precisely how the money should be spent.

Leave aside the controversy over whether this amounts to control-freakery. The real point is that Mr Brown has a theory. He thinks that better public services are needed not just for their own sake. He believes they hold the key to prosperity and social harmony. Better child care will help mothers get back to work. Better education will lead to more mature adults and a more efficient workforce. Better training and more job opportunities will help youngsters keep away from crime. Better health care will reduce days lost at work. As time goes by, child poverty will disappear, and muggings, truancy, drug-taking and teenage pregnancies will decline. Social exclusion will become a thing of the past. Ours will become a wealthier, healthier, fairer, safer and more contented society.

That is the aim. Today we are being shown nothing less than New Labour's route to the transformation of Britain. By traditional yardsticks the plans are less Left-wing than anything attempted by Old Labour - but, in their ambition, at least as radical. If Mr Brown succeeds, he will not only secure his reputation as an outstanding Chancellor; he will have changed the terms of political debate for a generation. The case for 'invest and reform' (New Labour's version of the unmentionable 'tax and spend') will be won.

What if he fails? Suppose the new money disappears like water through sand, without any lasting improvements to our public services or our overall quality of life, and that crime and poverty persist at current levels. Then today will mark the beginning of the end of New Labour. The Conservatives will finally have a chance to fight back with an alternative and plausible set of ideas about how to run Britain.

Economically, today's figures look reasonably safe; but politically Mr Brown is taking the biggest gamble of his career.

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