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Pre-Budget Speech Wednesday, 4 November, 1998, 16:28 GMT
Gordon's 'good ship'
ship
Is stormy weather ahead for the good ship UK Economy?
BBC economics reporter Chris Giles looks at Chancellor Gordon Brown's pronouncements on the British economy:

It is comforting to know that the good captain of the economy, Gordon Brown, is steering a course of stability in an uncertain and unstable world.

And, boy, don't we know it.

In two short speeches in two days, he has trotted out this nautical metaphor no less than 10 times.

British chancellors last got hung up on transport metaphors in 1990 and 1991.

Then two previous captains of the economy thought they were flying planes, not sailing boats.

John Major and Norman Lamont never tired of telling the public how they would ensure the economy had a soft landing; only to see the economy crash around them in recession shortly afterwards.

Gordon Brown might do well to remember that. And also perhaps remember that the last time a ship's captain was so sure his ship was unsinkable he promptly hit an iceberg.

Economy

The reason Gordon Brown was able to deliver such an upbeat message is because his long term growth forecasts are optimistic.

chris giles
Chris Giles: "Nobody knows if the economy will bounce back"
He admitted economic growth would fall by 3/4 of a percentage point to 1-1.5% next year, but after that small slowdown Treasury figures suggest the economy will bounce back remarkably.

In 2000, the Treasury is forecasting 2.25-2.75% growth, the same as in the last Budget.

In 2001 they say the economy will grow a full 3/4 of a percentage point faster than previous forecasts, at 2.75-3.25%.

So we lose 3/4 of a percentage point of growth in 1999 only to regain it in 2001.

No wonder all the figures on tax revenues, spending and borrowing show no cause for concern.

The real issue over the next few years is whether this rosy scenario will indeed be realised. And no one can say for certain.

All one can say is that most forecasters would probably put the Treasury figures on the optimistic side.

And never forget that on past performance we can expect the Treasury to be wrong in its growth forecast every year by 1.5 percentage points.

Policy announcements

The real point of the pre-Budget report is to put new policy and tax ideas into the public domain before legislating.

It is a brave idea and a good one. The worst tax measures can be avoided because experts can point out the pitfalls in any ideas before they are law.

The government can then change the detail of its plans, while sticking to its objectives.

The government announced a number of new areas it will consult on:

  • How to encourage employees to own shares in their companies despite three schemes of tax relief already existing.

  • How much further the government should tax energy from polluting firms.

  • How to make banks serve small business better.

But listening to Gordon Brown's speech, I found myself playing a game - spot the repeat announcement.

The Treasury seems to delight in seeing how many times it can get away with putting out the same policy again.

Here is a short selection from the speech, but I can guarantee there are many more:

  • 19bn extra money into education - first announced in July 1998, repeated endlessly since.

  • First year investment allowances for small firms - announced in July 1997 Budget, extended March 1998 Budget, now made permanent.

  • Merge the Contributions Agency with the Inland Revenue in April 1999 - announced March Budget 1998.

  • Consult on a tax credit for research and development - announced November 1997.

  • Public service agreements for government departments announced July 1998.

  • Consultation on lowering road tax for small clean cars - announced March 1998.

  • Aligning employers' National Insurance floor with the personal allowance of income tax - announced March 1998.

  • When it is economically right, introduce the 10p starting rate of income tax - announced every major speech.

  • Introduce the Working Families Tax Credit from October next year - announced March 1998.
See also:

03 Nov 98 | Pre-Budget Speech
05 Nov 98 | Pre-Budget Speech
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