Chancellorship of Gordon Brown
Chancellorship of Gordon Brown 2 May 1997 – 27 June 2007 | |
Party | Labour |
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Election | 1997, 2001, 2005 |
Nominated by | Tony Blair |
Appointed by | Elizabeth II |
Seat | 11 Downing Street |
Coat of arms of HM Government |
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Shadow Chancellor
Chancellor of the Exchequer
Policies
Prime Minister of the United Kingdom
Post–Prime Minister
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Brown was appointed chancellor by Prime Minister Tony Blair following Labour's victory in the 1997 general election, its largest landslide general election victory in history, and served in the role throughout Blair's premiership. One of Brown's first acts as chancellor was to grant the Bank of England the freedom to set the UK's interest rate, a decision that had previously been the responsibility of the chancellor. Brown was reappointed chancellor following Labour's landslide victory in the 2001 general election, and won a third term after the party also won the 2005 general election, though with a vastly reduced majority.
During his chancellorship, Brown outlined
Brown's ten years and two months as Chancellor of the Exchequer set several records. He was the longest-serving Labour Party Chancellor of the Exchequer ever, beating Denis Healey, who was Chancellor for 5 years and 2 months from 5 March 1974 to 4 May 1979. On 15 June 2004, he became the longest continuous serving Chancellor since the Reform Act 1832, passing the figure of 7 years and 43 days set by David Lloyd George (1908–1915). However, William Ewart Gladstone was Chancellor for a total of 12 years and 4 months in the period from 1852 to 1882 (although not continuously).
Brown stated his chancellorship had seen the longest period of sustained economic growth in
Major acts as Chancellor
Following Labour's victory in the
It has long been rumoured a deal was struck between Blair and Brown at the former Granita restaurant in Islington, in which Blair promised to give Brown control of economic policy in return for Brown not standing against him in the 1994 Labour Party leadership election.[11][12][13] Whether this is true or not, the relationship between Blair and Brown was central to the fortunes of New Labour, and they mostly remained united in public, despite reported serious private rifts.[14]
Bank of England
On taking office as Chancellor, Brown gave the Bank of England operational independence in monetary policy, and thus responsibility for setting interest rates. At the same time, he stripped the Bank of England of its regulatory powers, giving them to the newly created Financial Services Authority, whose board is appointed by the Treasury.
Taxation and spending
Brown adhered to Labour's 1997 election manifesto pledge not to increase the basic or higher rates of income tax. He reduced the starting rate from 20% (pre-1997) to 10% in 1999, before abolishing the starting rate in 2007; a decision that led to an immense backbench revolt, and reduced the basic rate from 23% (pre-1997) to 22% (2000) and then 20% (2007).[15]
Brown increased the tax thresholds in line with inflation, rather than earnings, which rise more quickly during periods of economic growth. This results in fiscal drag in which more taxpayers are drawn into the upper rates (e.g. in 2000–01 there were 2,880,000 higher-rate taxpayers, whereas in 2005–06 there were 3,160,000).[15]
In 1997, Brown also introduced taxation of pension funds. Documents subsequently released under the Freedom of Information Act showed that civil servants warned at the time that the move, which generated £5,000,000,000 in tax revenue, could lead to the closure of many occupational schemes, which subsequently came to pass. In 2008, a biographer of Brown, Tom Bower, claimed that Brown had originally sought a larger sum from pension funds, but backed down in the face of opposition.[16]
In contrast,
Under Brown, telecom radio frequency auctions gathered £22,500,000,000 for the government. By using a system of sealed bids and only selling a restricted number of licences, they extracted high prices from the telecom operators.[17] Germany at this time applied a similar auction; some allege that these together caused a severe recession in the European telecoms development industry (2001 Telecoms crash) with the loss of 100,000 jobs across Europe, 30,000 of those in the UK.[18] But, as Paul Klemperer, one of the designers of the auctions, points out, "[t]he United States held no 3G auctions, yet telecoms companies lost just as much: in fact, they lost more."[19]
Once the two-year period of following the Conservative's spending plans was over, Brown's 2000 Spending Review outlined a major expansion of
The Centre for Policy Studies found the poorest fifth of households, which accounted for 6.8% of all taxes in 1996–7, accounted for 6.9% of all taxes paid in 2004–5. Meanwhile, their share of state benefit payouts dropped from 28.1% to 27.1% over the same period.[22]
According to the OECD UK taxation had increased from a 39.3% share of GDP in 1997 to 42.4% in 2006, going to a higher level than Germany.[23] This increase has mainly been attributed to active government policy, and not simply to the growing economy. To have brought this about with only one explicit tax rise has led to accusations of Brown imposing stealth taxes. A commonly reported example resulted in 1997 from a technical change in the way corporation tax is collected, the indirect effect of which was for the dividends on equity investments held within pensions to be taxed, thus lowering pension returns and allegedly contributing to the demise of some pension funds.[24] The Treasury contend that this tax change was crucial to long-term economic growth: the existing corporation tax system created biased incentives for corporations to pay out profits as dividends to shareholders (including pension funds, who could then reclaim the tax paid) rather than to reinvest them into company growth (which would result in corporation tax being paid). The old system of corporation tax was widely viewed by economists as a constraint on British economic growth.[25]
Growth development and employment
Brown pointed to two main accomplishments: growth and employment. An OECD report[26] shows UK economic growth averaged 2.7% between 1997 and 2006, higher than the Eurozone's 2.1%, though lower than in any other English-speaking country. UK unemployment is 5.5%,[27] down from 7% in 1997 and lower than the Eurozone's average of 8.1%.
In October 1997, Brown took control of the United Kingdom's membership of the European single currency issue by announcing the Treasury would set five economic tests[28] to ascertain whether the economic case had been made. In June 2003, the Treasury indicated the tests had not been passed.[29]
Between 1999 and 2002, Brown
Brown believes it is appropriate to remove much of the unpayable
When Labour was re-elected for a third consecutive term at the 2005 general election (though with a vastly reduced majority following the landslide victories at the previous two elections), many MPs spoke of the Labour election victory as being Brown's achievement rather than Blair's; while Blair was facing criticism as prime minister for leading the UK into Afghanistan and Iraq, Brown was receiving credit for helping secure a strong economy for Britain.[35]
On 20 April 2006, in a speech to the United Nations Ambassadors, Brown outlined a "
Other statements and events
Higher education
In 2000, Brown started a major political row about higher education (referred to as the Laura Spence affair) when he accused the University of Oxford of elitism in its admissions procedures.[37] He described the university's decision not to offer a place to state school pupil Laura Spence as "absolutely outrageous" and implied its decision was based on her background rather than her academic potential. This started a major and hotly argued row in the media in which Oxford strongly denied these accusations. With his comments, Brown can arguably be credited with raising widening participation to higher education up the political agenda. However, many of his opponents said Brown's comments were ill-founded; including Lord Jenkins (then Chancellor of the University of Oxford) who said "nearly every fact he used was false," and that Brown's speech had been a "little Blitzkrieg in being an act of sudden unprovoked aggression".[38]
Anti-racism and popular culture
During a diplomatic visit to
Run-up to becoming prime minister
In October 2004, Blair announced he would not lead the party into a fourth general election, but would serve a full third term. Political comment over the relationship between Brown and Blair continued up to and beyond the 2005 election, which Labour won with a reduced majority and reduced vote share.
Blair announced on 7 September 2006 that he would step down within a year. Brown was the clear favourite to succeed Blair; he was the only candidate spoken of seriously in Westminster. Appearances and news coverage leading up to the handover were interpreted as preparing the ground for Brown to become Prime Minister, in part by creating the impression of a statesman with a vision for leadership and global change. This enabled Brown to signal the most significant priorities for his agenda as prime minister; speaking at a Fabian Society conference on 'The Next Decade' in January 2007, he stressed education, international development, narrowing inequalities (to pursue 'equality of opportunity and fairness of outcome'), renewing Britishness, restoring trust in politics, and winning hearts and minds in the war on terror as key priorities.
Blair said that he expected Brown to succeed him, and that Brown "would make an excellent Prime Minister". When nominations for the leadership elections opened, Blair was one of those nominating Brown. The election process concluded with Brown being declared leader at a special conference on 24 June 2007. On 27 June, Blair resigned as prime minister and was succeeded by Brown. He was succeeded as chancellor by Alistair Darling the day Brown became prime minister.
Budgets
Brown delivered eleven budgets during his chancellorship; 1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, and 2006.
1997
In his budget speech, which he described as a "people's budget", Brown told the House of Commons the government was spending more on debt than education, and set a five-year target to reduce the public deficit, while also announcing that the government would only borrow to invest and public debt would be held at a "prudent and stable level over the economic cycle". He set the underlying
1998
Titled New Ambitions for Britain,[41] and with "prudence as a purpose" as its narrative,[42] Brown's 1998 budget sought to strike a careful balance between maintaining Labour's broad appeal among the Middle England demographic who had voted for the party the previous year, thus helping Tony Blair to become prime minister, while offering help to those on low incomes.[43] His statement set out to achieve four objectives—stability, enterprise, welfare reform and strong public services. He told the House of Commons: "For decades, under Governments of both parties, the great economic strengths of our country have been undermined by deep-seated structural weaknesses—instability, under-investment, unemployment." He hoped to address this with a long-term plan for economic growth and success.[44]
He reported that the five-year plan to reduce the UK's deficit announced in his 1997 budget was being achieved at a faster rate than had been forecast, with the
1999
The budget took place during a period of continuing economic expansion, shortly after the launch of the Euro currency on 1 January 1999, and at the tail end of the dot-com bubble. During 1998, net public sector debt stood at £361.2 billion, 35.6 per cent of GDP.[46][47] Interest rates had declined rapidly over the previous twelve months from a peak of 7.5 per cent in June 1998 to 5.5 per cent by February 1999,[48] whilst inflation during 1998 was recorded at 1.6 per cent (CPI) and 3.4 per cent (RPI).[49][50]
A new starting rate of
2000
The millennium year witnessed Britain's major trading partners, particularly the US and several European economies, enter economic difficulties as part of the
The basic rate of
2001
2002
The most significant policy implemented as part of this Budget was the 1%
2003
2004
2005
2006
Notes
References
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- ^ Glover, Julian (17 March 2005). "His record – 304 years and counting". The Guardian. London. Archived from the original on 22 September 2007. Retrieved 28 April 2010.
- ^ Halligan, Liam (16 October 2006). "Brown's raid on pensions costs Britain £100 billion". The Daily Telegraph. Archived from the original on 9 February 2009. Retrieved 27 February 2009.
- ^ Stewart, Heather (22 July 2002). "Pension blame falls on Brown". The Guardian. Archived from the original on 6 December 2008. Retrieved 4 August 2008.
- ^ Dawar, Anil (21 April 2008). "Q&A: 10p tax rate cut". The Guardian. Archived from the original on 25 April 2008. Retrieved 4 August 2008.
- ^ "A reborn Gordon Brown could be the man who saved the union". Financial Times. 17 September 2014. Archived from the original on 21 September 2014. Retrieved 19 September 2014.
- ^ "Budgeting for stable economic growth" Archived 28 May 2007 at the Wayback Machine
- ^ Glover, Julian (17 March 2005). "His record – 304 years and counting". The Guardian. London. Retrieved 28 April 2010.
- ^ Thornton, Philip (17 March 2005). "Sleight of hand fails to hide gaping holes in public purse". The Independent. London. Archived from the original on 12 October 2007. Retrieved 28 April 2010.
- ^ "Election fact check: Economic growth". BBC News. 8 April 2005. Retrieved 28 April 2010.
- ^ White, Michael (6 June 2003). "The guarantee which came to dominate new Labour politics for a decade". The Guardian. Archived from the original on 11 October 2008. Retrieved 1 March 2008.
- ^ Mayer, Catherine (16 January 2005). "Fight Club". Time. Archived from the original on 27 January 2008. Retrieved 1 March 2008.
- ^ Brown, Colin; d'Ancona, Matthew. "The night that power was on the menu". The Daily Telegraph. Archived from the original on 2 August 2017. Retrieved 11 May 2017.
- ^ Wheeler, Brian (10 May 2007). "The Tony Blair story". BBC News. Archived from the original on 27 November 2007. Retrieved 1 March 2008.
- ^ Briefing noteNo. 9, March 2006
- ^ Brown's tax raid on pensions The Metro 26 Oct 2009
- guardian.co.uk. Guardian Media Group. 13 April 2000. Retrieved 29 February 2008.
- ^ Spectrum pricings uncertain future, Electronics World, Vol 108. September pp.24–25
- ^ Klemperer, Paul (2004). "Were Auctions a Good Idea?" (PDF). Auctions: Theory and Practice. Princeton University Press. p. 209. Retrieved 26 November 2008.
- ^ More get tax credit overpayments BBC News, 31 May 2006
- ^ The impact of tax and benefit changes between April 2000 and April 2003 on parents' labour supply Blundell, R., M. Brewer and A. Shepherd, Institute for Fiscal Studies, Briefing Note No. 52, 2004
- ^ Poor lose out in Brown's tax reforms, The Times 3 September 2006.
- ^ General Government Outlays as percentage of GDP OECD
- ^ Brown's raid on pensions costs Britain £100 billion, The Daily Telegraph 16 October 2006.
- ^ That pensions raid, Evan Davis 2 April 2007.
- ^ OECD Economic Outlook No. 78 Annex Tables — Table of Contents Archived 3 July 2007 at the Wayback Machine OECD
- ^ National Statistics Unemployment rate
- ^ The five tests The Guardian 29 September 2000
- ^ UK 'not yet ready for the euro' BBC, 9 June 2003
- ^ HM Treasury review of UK gold reserves sales Archived 3 July 2007 at the Wayback Machine
- ^ Brown's gold sale losses pile up as bullion price surges Scotsman.com website 28 November 2005extrac
- ^ a b c Gold: Does Gordon Brown's regret selling half of Britain's gold reserves 10 years ago?, The Daily Telegraph, 8 May 2009
- ^ "Gordon Brown & IMF Gold Sales". Tax Free Gold. Retrieved 30 March 2007.
- ^ "Gordon Brown answers your questions". BBC News. 15 June 1999. Retrieved 28 April 2010.
- ^ "Who has been UK's greatest post-war PM?". BBC News. 16 September 2008.
- ^ Speech by Gordon Brown, New York, 20 April 2006 Archived 11 June 2007 at the Wayback Machine
- ^ "Oxford 'reject' wins Harvard scholarship". BBC News. BBC. 22 May 2000. Retrieved 30 March 2007.
- ^ "Peers condemn Oxford attack". BBC News. BBC. 15 June 2000. Retrieved 30 March 2007.
- ^ Mukherjee, Krittivas; Desai, Sumeet (19 January 2007). "Brown throws weight behind Indian star". The Washington Post. Retrieved 27 June 2007.
- ^ "Full text of Gordon Brown's speech". Guardian Unlimited. London: Guardian News and Media Limited. 27 February 2007. Retrieved 30 March 2007.
- ^ "CHRONOLOGY-The budget 1997-2006: Brown's decade". 16 March 2007. Retrieved 25 November 2022 – via www.reuters.com.
- ^ "BBC NEWS | Events | Budget 98 | BUDGET NEWS | Dear Prudence ... Love Gordon". news.bbc.co.uk. Retrieved 26 November 2022.
- ^ "Brown's grand coalition: Prudence with a purpose is Budget keynote". the Guardian. 18 March 1998. Retrieved 26 November 2022.
- ^ "INTRODUCTION (Hansard, 17 March 1998)". api.parliament.uk. Retrieved 26 November 2022.
- ^ "STABILITY AND PRUDENCE (Hansard, 17 March 1998)". api.parliament.uk. Retrieved 26 November 2022.
- ^ "Net Debt (excluding public sector banks)". Office for National Statistics. Retrieved 1 July 2019.
- ^ "Net Debt (excluding public sector banks) as % of GDP". Office for National Statistics. Retrieved 1 July 2019.
- ^ "Official Bank Rate history". Bank of England. Retrieved 1 July 2019.
- ^ "CPI annual rate". Office for National Statistics. Retrieved 1 July 2019.
- ^ "RPI annual rate". Office for National Statistics. Retrieved 1 July 2019.
- ^ "Gordon Brown: a decade of Budgets". BBC News. Retrieved 1 July 2019.
- ^ "Net Debt (excluding public sector banks)". Office for National Statistics. Retrieved 4 July 2019.
- ^ "Net Debt (excluding public sector banks) as % of GDP". Office for National Statistics. Retrieved 4 July 2019.
- ^ "Official Bank Rate history". Bank of England. Retrieved 4 July 2019.
- ^ "CPI annual rate". Office for National Statistics. Retrieved 4 July 2019.
- ^ "RPI annual rate". Office for National Statistics. Retrieved 4 July 2019.
- ^ "Gordon Brown: a decade of Budgets". BBC News. Retrieved 4 July 2019.