The big Brown mess we're in - Part 1
But... he also managed to alienate the left of the Labour Party, some of whom had been clinging desperately to the hope his premiership would signal a return to 'traditional' Labour values, with one simple act. He received Thatcher at Downing Street, in the full glare of publicity, praising her as a "conviction politician". Now, the visit may very well have been a kindness to the 81 year-old widow, but for Brown, the supposed more left-wing of the Brown-Blair partnership, to welcome her, praise her, appear with her in full publicity was, I believe, a terrible mistake for him. Oh yes, it enabled him to score some short term cheap points against the Conservatives (who were trying to portray themselves as more, well, fluffy than the Thatcher years), but it damaged his relationship with the core of his own party, those who had been hanging on for him for years. It revealed an obsession with student style politics, cheap point scoring, and not the kind of conviction politics he was supposedly praising.
From that point on, it all started to go wrong. The polls were so good that some within the government started to press Brown to hold a snap general election. This was not necessarily a bad idea, but whichever decision was to be made, it had to be made quickly. As it was, Brown dithered, and the inheritance tax issue suddenly exploded.
I'm still amazed that this issue was as big as it was. Inheritance tax is, frankly, a non-issue to the overwhelming majority of voters. 96% of estates are unaffected by it. And yet, somehow, working and middle class voters, who would never have to deal with it, suddenly saw it as a major problem. This 'tax on death' as it was dubbed was used by the Tories was used as an example of 'stealth taxes', of a cunning and devious administration pinching pennies from the public. I even heard one columnist claiming inheritance tax was causing a reduction in first-time house buyers, as they had to pay up on money inherited, rather than buy a house...
This was a chance for Brown to show himself as a conviction politician. Inheritance tax catches only the very largest estates. It helps to stop the accumulation of vast family fortunes, dynastic money and privilege. And yet... he was running scared from Tory attacks. They had, frankly, left him alone over the summer, his honeymoon period. To have attacked him while the country was reeling from various calamities would have seemed churlish. But now the gloves were off, and Brown had to deal with attacks on him for the first time. And he failed the test.
Instead of going out and defending the whole concept of the tax, he crumbled, and got his puppet chancellor to announce a rapid change. The change in itself was minor - a combining of spousal allowances, meaning instead of two allowances of £300,000, there was one of £600,000 - and achieved little - anyone in a position to worry about the tax had already arranged their affairs to achieve the same effect. But the perception was that Brown had finally been 'found out' on a stealth tax, and had backed down. Suddenly the Tories were able to go back to their old mantra of claiming Labour were a high tax, high spend party, and questions on their economic competence were back on the table, where they hadn't been for more than a decade.
In light of this, and the damaging effect on the polls, Brown finally quashed the rumours of a snap election. If he'd quashed the rumours immediately, it wouldn't have been a problem for him. But because he allowed the speculation to drag on for weeks, he was seen to be running from the issue. Personally, I have some sympathy with him on this issue. I take forever to make a decision - and when I do make it, it is almost always the same as I would have made long before. I have issues with making a final decision until I absolutely must - it seems foolish to do so before then. I acknowledge this as a failing in myself, and I recognise the same flaw in Brown. I don't think it means the decisions he makes are wrong, possibly quite the opposite. But unfortunately, these days it is better for a prime minister to make a quick decision, any decision, and stick with it, than it is for him to be seem as 'dithering'. 'Ditherer Brown' was another label the Tories were going to use over and over again in the months to come. Better to be quick and wrong than slow and right.
And, of course, we mustn't forget Northern Rock.
Full disclosure: I've had an account with Northern Rock since the days it was a building society. I think it's got about £50 in it, just as it has for the last decade. I also voted for it to stay a building society. I think there may be one other person out there who voted the same way, but I have yet to find them.
Northern Rock was a strange one. Its business model was perfect while credit was cheap. It even had some contingency for when credit became more expensive. What it didn't have was contingency for when credit became impossible to find. Northern Rock was like a desperate young house-holder, borrowing money on 0% credit cards to pay the mortgage. But when the 0% deals ended, they had nowhere to turn. Like the young house-holder, they had a lender of last resort - not their mum and dad, but the Bank of England. But like gossipy parents, the BoE couldn't keep its mouth shut, and let everyone know what was happening. (To be fair, it is entirely possible it would have fallen foul of EU competition rules if it hadn't.) Whatever the reasons, this loquacity revealed the BoE's complete inability to deal with members of the public. They told everyone that Northern Rock had come to them cap in hand, but that everything was going to be fine. Honest.
The next day, there was a run on Northern Rock.
Queues stretched along streets. News reporters searched desperately for signs of wild and frantic panic, but were met with taciturn northerners. "Why are you panicking?" asked the reporters. "I'm not, I'm being rational. I am removing money to put it somewhere safer." The reporters went elsewhere to search for scenes of chaos. They should have been looking in Whitehall.
Northern Rock was now doomed. Cash being removed from accounts made its reliance on credit more extreme, meaning they needed more help from the BoE, meaning more people felt they had to get their money out. Their shares plummeted to become junk. As a result of their demutualisation, there were hordes of small investors, those given shares when it converted to a bank who had never sold them, never owned any other shares. The meaning of a shareholder economy suddenly became clear to them.
And all the while, the chancellor and BoE dillied and dallied over the right response. After a couple of days, they guaranteed all deposits in the bank, but it was too little too late. Desperate to avoid nationalisation and all the echoes off the 1970s that word brought, the government allowed the bank to limp along, the funds provided by the BoE growing ever greater. Finally, months into the crisis, the government bit the bullet and took the bank into 'temporary public ownership'. None in the government mentioned the n-word.
There were claims the BoE had provided the money to Northern Rock only because it was a big player in the north-east off England, a Labour heartland, that they were protecting their vote at the expense of the rest of the country. The north-east were bemused, both at the idea Northern Rock was that important to them, and at the idea this Labour government would do anything to protect them. They had already lost their belief.
Northern Rock was a victim of the global credit crunch, which, as we all know, is all the fault of the Americans. (The fact no-one was forced to buy these bizarre credit vehicles is handily ignored in that nice view, but never-mind.) It was a victim of a global event, which hammered banks around the globe. Northern Rock's mistake was that it had never really expanded its traditional banking arm, relying on mortgages to increase their profits without bringing in more depositors to help with liquidity. It wasn't a bad plan for many years, but when the perfect storm came, it couldn't weather it.
Regardless of the causes of its failure, it, fairly or not, was used as a symbol of economic mismanagement by the government, by Gordon Brown specifically. He had built his name and reputation by being the Iron Chancellor, on economic competence, on years of quite stunning performance of the UK economy. Now, finally, the opposition had a way of attacking that. They seized on it gleefully, the Tories believing they now had a magic combination - they could accuse Brown of cruel and unfair taxation, and of squandering the money in economic mismanagement. It was like the 1980s all over again.
But it was worse than that. Everyone knew Brown had been desperate to avoid nationalisation. And yet, after months and months, he has been forced to allow it. This portrayed him as both being forced into doing something, and being a ditherer. His reputation, his image, his character seemed to be falling apart more and more every day.
And then came the biggie.
Unlike his other problems, the 10p tax row was something Brown should have seen coming a mile off. He has no-one to blame but himself for this one. It was a taxation policy he created and announced as chancellor. Essentially, there used to be a starting rate of tax of 10% on the first £2,000 above your personal allowance, followed by the basic rate of 22%. In his last budget, Brown reduced the basic rate of income tax to 20%, and completely abolished the 10% tax rate - replacing it with the basic rate. What this meant was that for that first £2,000 above your personal allowance, your tax rate was doubled. Now, the more you earned that was in the basic rate band, the better off you would be - the 2% cut quickly compensated. But, of course, if you didn't earn much, you lost out a lot.
Of course, it wasn't as simple as this, it rarely is. Various tax credits, allowances, and benefits changes meant many people weren't affected at all. But there was a core of people who were badly hit, mainly young single childless people with low incomes. (Incidentally, a group who have very low voting rates, but I am sure this had no input into the calculations.)
In simple terms: some of the poorest people were paying more tax, while the better off were paying less.
If the economy had been doing well, I doubt this would have been the issue it was. But while people were starting to suffer with rapidly rising food and petrol prices, this added tax was too much. Labour MPs, who had presumably not been paying attention when this was announced the previous year, suddenly started screaming for this tax change to be stopped. The government remained firm - you couldn't go changing any of the tax plans on a whim, the whole worked as a package or not at all. It was just too complex to fiddle with.
This was too good an opportunity for the Tories to pass up. They were able to attack a Labour prime minister for taxing the poor to give to the rich. Their audacity was breathtaking. The resonance with the public incredible. And, sadly, the logic was unarguable. It was precisely what a Labour government had done.
This row rumbled on. Ultimately, the government was forced into a climb-down, again. The possible revolt by Labour MPs, who would have voted against the finance bill, had every chance of success, leaving the government in an impossible position. Emergency changes were made, allegedly in response to the changed economic environment. Brown had said nothing would change, and been forced to back down. He was seen as weak, as a ditherer, and as attempting to get away with an unfair tax.
It still amazes me how many people in the government still don't seem to understand what a huge issue this was. They have put in place a package which compensates almost all those who would have lost out, and more. But this one wasn't about the money. This one was about perception. Labour's supporters and voters had forgiven many of the government's excesses. There was anger over wars, over the friendliness to business, their attitude to the US, many, many things. But through it all was a belief that, fundamentally, the party would protect the worst off in society. That, ultimately, they would make things better for them.
That illusion was shattered, and no amount of back-pedalling can bring it back. Some members of the government seem to believe that the changes they made solved the issue, but the real issue was the loss of trust from their most committed voters. Trust takes a long time to build, and can be destroyed in an instant. And once you have lost it, it is almost impossible to get it back.
The cross-section of society that has kept Labour in power lost their trust. The traditional core vote has seen the Labour government attacking them. The 'middle Britain' voters have had it rubbed in their face that they are being bought at the expense of others.
And worst of all, because of a peculiarity of the British character, the whole farrago was exacerbated by one simple fact: the taxation changes were seen as unfair. For a government to be seen as unfair is the kiss of death.
This, to me, was the key point. Before this, Brown could have recovered. Some astute handling of the economy, guiding Britain through the bad times, could have saved him. Being seen to ameliorate the worst of the global problems would have been enough. But after this, he had no chance. The mood of the country changed against Brown, against the Labour government. It's just a matter of time.
The farce of the change to 42 days of detention without trial was just a footnote. By this point, everyone knew that the government would cave and offer inducements to MPs to get them to back it. Deny it as they might, no-one now believes the rebels didn't get paid off in some way. And worse for the government is their own backbenchers now know the leadership will back down, that they can be bullied into giving in. Brown has lost control of his own party - subtly, because the outcome of internecine strife of the Conservatives is still remembered, but he has lost control all the same.
And so we are left with a prime minister who was portrayed as an Iron Chancellor, a man who kept control with a tight grip, a man who would not be swayed, now being perceived as a weak, vacillating leader, who has lost control of his party. What a difference a year makes.
Where do we go from here?
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