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Last Updated: Monday, 29 September, 2003, 12:28 GMT 13:28 UK
Do the Chancellor's sums add up?
Analysis
By Stephen Coulter
BBC economics analyst

BBC News Online listens to Gordon Brown's keynote speech at the annual Labour conference and examines whether his verdict on the economy can stand up to scrutiny.

Social justice and a booming economy? Can government really secure both wealth and compassion at the same time?

Gordon Brown
Mr Brown impressed his Labour credentials on the audience
Gordon Brown certainly thinks so, and in his Labour conference speech this afternoon the Chancellor reiterated his conviction that greater equality needn't derail the thriving UK economy.

Mr Brown said that British values of economic dynamism mixed with social justice could see the UK setting the pace in the global economy.

In his six years at Number 11, the Chancellor has tried to marry traditional Labour goals with a concern for economic performance more usually associated with the Conservatives.

His speech was littered with nods to "Old Labour" concerns about equality. But there was also much talk of productivity and enterprise.

I believe that at every point in our history, Labour needs not just a programme but a soul
Gordon Brown

Certainly, the performance of the economy is one of the better bits of the government's record.

Just for once the UK economy avoided - rather than spearheaded - the recent global economic downturn, which saw the US, Japan and leading eurozone countries mired in recession.

And the three key indicators of economic health which most matter to voters - low inflation, interest rates and unemployment - all underline how different the economy is now from the last time Labour was in power.

This has been achieved alongside some ostensibly "bad for business" policies like the National Minimum Wage, not to mention the big rises in taxation introduced to pay for expanding the NHS.

Mr Brown said: "These reforms show that our economic strength didn't just happen, we made it happen. Labour values made it happen."

Doubting Gordon

But critics carp that Labour's record on the economy is nothing to shout about, and Brown's policies risk handicapping it even further.

A worry for the government is that the war in Iraq is not the only area where its word is increasingly being doubted.

Brown's optimistic forecasts show a Chancellor determined to ignore reality
Matthew Taylor
Liberal Democrat's Treasury spokesman
The last 12 months have seen a growing disparity between Brown's optimistic economic forecasts, and the gloomier prognoses from independent economists.

Last month the International Monetary Fund slashed it forecast for UK GDP this year by 0.3% to just 1.7%.

It also cut its forecast for 2004 - when Brown is pinning his hopes on a rapid rebound in growth to rescue his public spending plans.

This chimes with the views of most UK-based economists, who see improved, but still below par growth for the next couple of years, and a ballooning budget deficit.

But the Treasury seems to be reading from a different hymn sheet. In the March budget Brown said he expected the economy to grow by between 2% and 2.5% this year, and by between 3% and 3.5% in both 2004 and 2005. This is way adrift of independent forecasters.

Spending to balloon?

Lower growth could jeopardise the government's ambitious spending plans. In the April 2003, Brown forecast that public sector net borrowing next year would be 24bn.

But rampant public spending and a slowdown in tax receipts mean even this huge figure now seems fanciful. Independent economists expect borrowing to be at least 10bn higher.

Yet Mr Brown confirmed in his speech that public spending would continue to rise when he sets out his spending plans next summer.

He said that next spending round will "not only lock in the higher spending" delivered so far but "do more... with further increases in spending and investment for our priorities in the years to come."

Matthew Taylor, the Liberal Democrat's Treasury spokesman, said that Mr Brown was promising the earth on spending.

"Brown's optimistic forecasts show a Chancellor determined to ignore reality, but he won't be able to escape downgrading his forecasts once again in his autumn budget statement."

Moreover the government also faces other pressures over the collapse in manufacturing, alongside the overheated housing market which could soon force the Bank of England to raise interest rates.

Business productivity - which Brown has pledged to transform - has fallen since Labour came to power.

The standing ovation at the end of the Chancellor's speech may soon give way to a less upbeat reception if the bad numbers on the economy keep coming in.


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