The Rt. Hon. Sir John Major KG CH

Tag: Gordon Brown

  • Article on the Economy under a Labour Government – 4 April 2010

    The text of Sir John Major’s article on the economy under Labour, published by The Sunday Mail on 4th April 2010.

    SIR JOHN MAJOR:

    On 7th May 1999, Gordon Brown announced that he was planning to sell off 400 tonnes of our natural stock of gold. The British economy was still in good health and required no cash injection, yet he threw away over a half a century’s worth of the country’s inheritance – at the very bottom of the market.

    This catastrophic decision – unilaterally made by Gordon Brown – has lost Britain £6.6 billion – double the cost of Black Wednesday. In fact, to put Black Wednesday in context – the Exchequer now borrows almost £3.3 billion every week, simply to cover Labour’s debts.

    Gordon Brown was warned about the gold sales. Senior Treasury officials cautioned him against it. Investment banks told him the price was too low and would rise. Yet he chose to ignore them all, and claimed he was acting “on the technical advice of the Bank of England”. We now see from documents released under FOI that the Bank of England was, in fact, reluctant to back his proposal, but a key passage still remains blacked out. What is it that the Prime Minister wishes to hide?

    The sale of gold is just one of many decisions that illustrates how the Blair/Brown years have wrecked the golden economic inheritance that the last Conservative Government bequeathed them. Alas, there are plenty more.

    In 1997, as Chancellor of the Exchequer, Gordon Brown abolished the Dividend Tax Credit paid to pension funds and companies. It has been estimated that this reckless action may have cost pension funds up to £150 billion.

    Indeed, Tony Blair’s own former pensions advisor stated that Gordon Brown “knowingly destroyed what was once one of the great pension systems in the world and he did it deliberately”. It was economic and social vandalism on a seismic scale.

    The Prime Minister consistently argues that Britain’s deficit has been the result of a global financial storm that started in America, and that spending grew because he did not want to “do nothing” during the recession. This is sophistry beyond the point of deception.

    A huge structural deficit – or government overspending that is with us year on year – has been built up by Gordon Brown since he stopped following the Conservative Government’s spending plans in 2001. As soon as he began to take his own decisions, the decline towards today’s economic train wreck began. Gordon Brown alone built this deficit. He alone is responsible for it. The British people will pay for it.

    And what of “boom and bust”? For years we had to endure the Blair/Brown mantra that they would abolish what they called “Tory boom and bust”. The British people have now discovered the reality. Labour has certainly abolished the boom, and has created an almighty bust. The Blair/Brown “boom” was a fake, built on a mountain of consumer and corporate debt, and the bust has been the longest and deepest – as Alistair Darling himself has admitted – for 60 years.

    Labour’s wild exaggeration about the cost of Black Wednesday was the beginning of a long history of bending statistics to distort truth and rational argument.

    Much of what the Prime Minister himself says is worthy of satire. Last summer, he tried to carry on the pretence that public spending would be increased over the next few years. He claimed repeatedly that expenditure would grow. This was patently absurd. Thankfully, David Cameron managed to change the terms of debate and won the argument that cuts are needed to get our record borrowing under control.
    But some of what the Prime Minister tries to claim is downright deception.

    When his sleight of hand was discovered over the abolition of the 10p tax band in 2007, he dismissed claims that this would hurt the poorest in society, saying “no one would lose out”. But the Institute for Fiscal Studies disagreed. Their own estimate was that 5.3 million families would suffer as a result of this policy.

    Most shamefully, the Prime Minister has deployed the same statistical chicanery on our Armed Forces. In October 2007 – in a cynically-timed visit – he flew to Iraq and told our troops that 1,000 of them would “home by Christmas”. In fact, the troops were just moved around the Gulf region, with an increase of over 500 personnel at sea, and an overall increase of 380 supporting operations in Iraq. Between September and December 2007, there was a reduction of only 430 troops in Iraq.

    Errors of fact in party political dispute can be excused, and even forgiven. But errors of fact affecting our Armed Forces in the field – and their families here at home who live in daily fear for the safety of their loved ones – can neither be excused nor forgiven. If any Prime Minister gives his word to service men and women – especially when they are engaged in active combat – this must be honoured to the letter. They deserve, and should expect, nothing less.

    And yet the deceptions continue: in the past few weeks alone, the Prime Minister has misled the public not once, not twice, but three times. First, he misled the Chilcot Inquiry, then the House of Commons, over defence spending, stating that spending had risen every year, when in fact it fell. Even his apology was disingenuous. He asserted that spending fell in “one or two” years, yet in fact it fell in four years since 1997.
    The Prime Minister then claimed 300,000 businesses had received “cash flow help” from the Government in the recession. Yet he must have known that the actual Government figure is only 160,000.

    Finally, by mingling two entirely separate sets of statistics, the Prime Minister claimed immigration is falling when, in fact, it is rising.
    Such a catalogue of errors is either incompetence or deception. Neither is acceptable nor worthy of the Office of Prime Minister.
    Gordon Brown’s personal decision to sell our gold at rock bottom prices – and for no good reason – cost Britain the equivalent of two Black Wednesdays. He has destroyed pensions. He has wrecked the economy. He has doubled the national debt and will do so again. Most regrettably of all, after thirteen years of this Labour Government, the word of the Prime Minister can no longer be trusted.

    When New Labour came to power it was hailed as a new dawn. But the sun is now setting. In May 1997, they inherited what Tony Blair’s own economic adviser termed a “better [economy] than that of any [incoming Government] in living memory”. They had the trust and goodwill of the British people. They have squandered it all.

    “A future fair for all” is Labour’s slogan in this election year. But having been let down so badly by this Labour Government in the past, how on earth can the British people believe they will be any better off with them in the future?

    Labour has had long enough to prove it is a Party fit to govern and has comprehensively failed that test. Time has finally run out for them and I hope that, on Tuesday, the Prime Minister will call the Election for which the country has been crying out for so long, and which he can no longer avoid.

  • Sir John Major’s Article on Gordon Brown – 7 May 2009

    The text of Sir John Major’s article on Gordon Brown, published in the Daily Telegraph on 7th May 2009.

    SIR JOHN MAJOR:

    In recent days, there have been many comparisons drawn between the present plight of the Labour Government and the final months of its Conservative predecessor. Similarities there may be – but the differences are striking.

    The Conservatives were in their 18th year of government: Labour is in its 12th. The Conservatives had no majority, and were at the mercy of a handful of rebels: Labour still enjoys a large majority. Conservative divisions were over policy – notably Europe – in which the dissenters believed they must prevail for the national interest: Labour has no such excuse. And – crucially – the Tory economy was well on track to full vigour: Labour’s is in the mire.

    In the mid-1990s, I was acutely aware the Tories were likely to lose the election. Indeed, on the morrow of the 1992 election victory, Chris Patten and I speculated on the unlikelihood of a fifth win: it was, we thought, stretching the democratic elastic just too far.

    Throughout the 1992-97 parliament, we tried to do what we believed was right for the country, although much of our programme was controversial – especially in our own party. We persevered with policies we believed would curb inflation and bring long-term economic benefit. So they did, but at the expense of our electoral prospects.

    Labour, by contrast, has retreated to tactics I believe they will live to regret. Too often, in the face of public hostility, they cite the last Conservative government as a precedent, the not-so-subliminal message being: “They’re worse than us.”

    It is not convincing. Take the roasting they received for mishandling the Gurkhas: Labour’s defence was that the Conservative government “had never done anything about it”. Nor had earlier Labour governments, and for the same reason: it had not been an issue. And if it had been an issue, why was there not a peep from Labour about it in the 1990s? Opposition days in Parliament are not a New Labour invention.

    After 12 years in office, excuses such as this are bordering on the desperate.

    Why do they do it? Habit, of course, for fact has never got in the way of New Labour fiction – it has been in their DNA since the mid-1990s.

    But now it seems they have lost all touch with reality: in their minds, what they say is truth, even if the facts don’t support it. Such delusion is dangerous – especially for a government.

    And it is continual. Since the Prime Minister can no longer defend Labour policies, he attacks a fictional Tory past at almost every Prime Minister’s Questions. To Mr Brown, the Tories are the enemy, therefore any criticism – however wrong or distorted – is permissible. Let us take one of his familiar attacks on David Cameron, flawed from beginning to end. According to Mr Brown, Mr Cameron was adviser to Norman Lamont when he raised interest rates to 15 per cent, and created three million unemployed. This is ludicrous. The belief that a 26-year-old political adviser would have been responsible for a Conservative government’s economic policies is fanciful. And – in any event – how does Mr Brown know what advice Mr Cameron offered his minister? He may well have advised against the government’s policies and been over-ruled.

    But Mr Brown doesn’t care: he simply wants to smear Mr Cameron for events over which he knows he had no control. The premise of his argument is also incorrect: interest rates were not raised to 15 per cent by Norman Lamont in the 1990s, but by Nigel Lawson in the 1980s.

    As chancellor, Norman reduced them from 14 per cent to 6 per cent.

    The Prime Minister is wrong about unemployment, too. First, a pedantic point: it did not reach three million under the Conservative government, but peaked well below. Furthermore, it was rising sharply long before Norman Lamont became chancellor, and David Cameron his adviser. Mr Brown knows all this, yet persists with charges that are fundamentally unworthy.

    And he is not alone. Other ministers continue to claim that Labour inherited three million unemployed whereas, in 1997, the claimant count was 1.6 million and falling rapidly.

    But Labour has not won three elections by allowing truth to get in the way of a good smear. The uncomfortable reality for Labour is that, however unpopular the last Conservative administration may have been, it was the only government in the last 50 years to leave office with every single economic indicator improving.

    In 1996-7, the economy had been growing for five years, and borrowing – now the nation’s nemesis – was £22 billion (although one of Labour’s “recalculations” upped it to £35 billion).

    Even so, the estimate for the current year is a staggering £175 billion. Similarly, total debt has doubled, and the taxpayer will be funding Labour’s debt mountain for many years to come.

    That the Conservatives bequeathed such a buoyant economy is not a truth universally acknowledged, for – in order to claim credit for the economy – Labour has peddled “disinformation” about its inheritance from the day it took office. The truth – apparent to independent economists – is that the years of prosperity under Labour were based on Conservative supply side changes (in the 1980s) and Tory destruction of inflation (in the 1990s).

    Did Labour build on that legacy? No. Instead, they squandered it, and will leave the country near bankrupt as a result. This slide from riches to rags inspires another Labour deception: that our present woes are entirely due to the financial crisis that began in America. Of course, there is an international dimension, but Labour’s alibi is – at best – a half-truth. Even if there had been no international crisis, the UK would still be in recession; our debts would still be at record levels; our pension system would still be wrecked; our education system would still need reform; our health system would still be unable to cope; and our prison system would still be overflowing with inmates who should not be there, while others who should are being released early.

    The Prime Minister hopes to win the next election but, in his heart, he must recognise his party is likely to lose. I offer him one piece of genuinely well-meant advice: fight the next election on policies, not personalities; on fact, not fiction; on substance, not spin. The people of this country deserve such a campaign, so that they can make an informed choice.

    It may not win Labour the next election, but Gordon Brown will leave office a more contented man.

  • Mr Major’s Speech to the Bow Group – 23 February 2005

    The text of John Major’s speech at the annual Bow Group lecture, made on 23rd February 2005. The speech was entitled – The Conservative Economic Inheritance – An Examination of Reality.

    JOHN MAJOR:

    The economy is central to politics: now is a good time to look beyond the soundbites and separate fact from fiction.

    First, some background.

    By the late 1970s, our economy was a basket case. Inflation and industrial unrest had dragged us down. We were “The sick man of Europe”.
    In the 1980s, market reforms turned us once again into a competitive nation.

    In the 1990s, inflation was – finally – tamed.

    The 1970s were Labour years.

    The 1980s and 1990s were Conservative years during which the Labour contribution was to oppose the Government’s policy.

    There is a tendency to take the present Chancellor of the Exchequer at his word. A small vignette suggests this can be a mistake.

    On his first weekend as Chancellor, Gordon Brown was given a presentation on the economy. “The figures are fantastic”, he was told by officials at the Treasury, “much better than predicted”.

    “What am I supposed to do”, asked the Chancellor, “write a thank you letter?”. I use the neutral word “asked”: yet, in his biography of the Chancellor, Tom Bower’s use of “snarled” gives a more vivid picture of the exchange.

    That same weekend, the Chancellor’s spin doctor was despatched to brief the media that “errors” and “black holes” had been discovered, all of which “threatened a nightmare”.

    The spinner of this little fib was Charlie Whelan, the Chancellor’s “Man in the Red Lion Pub”, whom you may recall as Alastair Campbell without the charm.

    It was – of course – untrue. He knew it to be untrue. We all now know that it was untrue: none of these “nightmares” emerged. It was pure scene setting. Brown’s intention was to create a climate in which he – and he alone – could claim credit for the economic conditions he had inherited. It also had the secondary purpose of laying the groundwork for future tax rises to be blamed on his predecessors.

    So – what do the figures tell us?

    They are very clear.

    The economy began growing in the First Quarter of 1992.

    By 1997, there had been five years of progressive growth every Quarter.

    During that five year period:

    – interest rates were more than halved – to 6%;
    – inflation fell to 2.6%;
    – unemployment had been falling monthly since 1993;
    – fiscal deficit was narrowing and moving towards surplus.

    Moreover, despite the outcry over alleged punitive Tory tax rises between 1990/97, the facts are striking.

    In 1990/91, tax as a percentage of GDP – the accepted measure – was 35.9%.

    In 1997/8, it was 36%. The net increase over 7 years was 0.1%.

    As Treasury officials had told the incoming Chancellor – the figures were “fantastic” and better than those left by any previous Government.

    Indeed – as corroborative evidence – even as the new Chancellor denounced the Conservatives, he offered tacit admission of our legacy by sticking rigidly to our own expenditure plans – an unprecedented act of homage.

    Economic conditions unwind over a long period. Neither good nor bad policy reveals itself immediately – only in slower time can it be judged.

    When Gordon Brown boasts of the record length of continual growth he is right – he just fails to mention it began in 1992 and that the first half was during the years of Conservative Government. He offers no glimpse that it was created by those Conservatives who tamed the late 1980s boom, bore the pain of squeezing inflation out of the system, and who instigated inflation targeting. Norman Lamont and Ken Clarke should take a bow but the Chancellor writes them out of his script.

    What Gordon Brown writes into his script is the charge that the Conservatives were responsible for “boom and bust”. This is one of those fibs, repeated ad nauseum, until it is so fixed in the public mind it becomes the accepted truth. It is a rewriting of history. In fact, before 1990, all Parties could have had that charge levelled at them: “stop-go” had bedevilled our economy for decades. But, in the early 1990s, it was a Conservative Government that put an end to boom and bust: and it has not returned since.

    But not everything has rolled on unchanged.

    Since 1997, the economy has continued to grow, but taxes have grown far faster. Using the same measure for calculating tax rises as in the Conservative years – the ratio of taxes to GDP – we see taxes have risen from 36% of GDP to 37.1%. This is eleven times as fast. Moreover, Treasury estimates suggest a yet faster rate of increase of taxes in the next Parliament. The IFS, IMF, NIESR, CBI, BCC, and the OECD all concur that taxes must rise because this time, Charlie Whelan’s fictional “black hole” in the current account is real.

    Income tax rates have not risen – they are too visible, too politically sensitive.

    But the facts are as follows:
    – 7½ million taxpayers have been dragged into a higher marginal rate of
    tax by under-indexing thresholds;
    – National Insurance has gone up for Employers, Employees and the Self-employed; the earnings limit has also been abolished, despite the Prime Minister’s categorical assurance it would not do so;
    – Tax allowances – such as those for married couples, have been abolished.
    – Stamp duty tax on house purchases rise – again and again and again;
    – Mortgage Interest tax relief has been abolished;
    – The Council Tax payer has seen bills soar – far beyond inflation.
    – Fuel tax and Vehicle Excise Duty rise repeatedly.

    New and imaginative taxes have been invented, including a tax of £5 billion every year on Pensions creating a crisis that is continuing. The sum total lost to Pensions now exceeds £40 billion. As a result, many pensioners may have to retire later or live on less than they had anticipated.

    The Chancellor was given specific warnings about this – from many quarters: even the Prime Minister knew it was foolish but allowed himself to be overruled by the Chancellor. This folly – which will affect pensioners way beyond this Government’s term in Office – was wholly avoidable.

    Thus far, the cumulative total of tax rises is 66 – despite a growing economy yielding more revenue for the Exchequer without any additional rises whatsoever. Gordon Brown has out-taxed all his predecessors – and every commentator predicts more to come if Labour win the next election.

    Perhaps a more vivid indication of the scale of those rises is this: if they had all gone on to the standard rate of tax, rather than to every nook and cranny of our lives, the basic rate of tax would have risen to 39p in the Pound.

    The market reforms of the 1980s and the death of inflation in the 1990s created the robust and growing economy Gordon Brown inherited.

    But, although there may be a time-lag, tax rises on this scale are bound to have an effect:

    (i) The growth in our productivity has collapsed by one-third since 1997. There is still growth, but far less than in 1997.
    (ii) Private (non-residential) Investment has fallen to 1.1% per annum over recent years – one-tenth of the 11.2% in the mid-90s.
    (iii) We now have the largest Trade Deficit for over 300 years. The Chancellor hopes export growth will correct this but all the signs are that it is set to widen further as our share of world exports is falling.
    (iv) As a competitive Nation, we have dropped from 4th in 1998 to 12th in 2001, and 15th in 2003.
    (v) Household debt is soaring and savings are falling. Under Gordon Brown, the savings ratio has never been above 6.7%; between 1991/7 it was never below 9.3%. This is not a semantic statistic: it means people are becoming very vulnerable to unexpected economic shocks. Live today – and pay tomorrow – is a risky notion if taken too far.

    I could go on – but the central point is simple: slowly, the strong economic position that Labour inherited in 1997 is deteriorating.

    It has not gone – yet. But it is getting worse.

    We will hear none of this from the Chancellor.

    He will talk of success – not tax rises.

    He will talk of growth – not loss of productivity and competitiveness.

    He will talk of enterprise – not the regulatory mountain that now engulfs business and costs them £30 billion.

    So – when we hear exaggerated claims from the Chancellor – a little caution in accepting them would be well justified.