Gordon Clown .Com

The newspapers today are reporting that Gordon has admitted his mistakes in an aim to make a clean break with the Blair years.  These mistakes he has specifically admitted to are as follows:

• Some mistakes made in Iraq
• Some mistakes over ID Cards
• The culture of celebrity

Cunningly, none of these mistakes could be directly pinned on Gordon and for most of them, Blair is more to blame.  Although quite who can take the blame for the “culture of celebrity” is anyones guess.  Gordon, of course, failed to admit his more numerous and gross errors as Chancellor, preffering to brush the following under the carpet:

• Inflating enormous debt bubble
• Destroying pension schemes
• Massive PFI off-balance-sheet debts
• Massively increasing tax burden through fiscal drag
• Selling Gold reserves just before Gold tripled in value
• Creating the biggest trade defecit in 10 years
• Pricing hundreds of thousands of people out of owning their own home
• Nose picking
• etc

Conveniently the above mistakes were not mentioned.  Over the coming months and years, as the long term effects of these blunders become progressively clearer.

The Independent lays into Brown today, saying that he is a nasty piece of work for the way he has treated those people who’ve been unfortunate enough to see their pensions go belly-up.  But to expect anything different from the Iron Chancellor is clearly misguided, as he has shown his true colours only too well in recent times.  Public dissatisfaction with Brown is bad, but with the move nextdoor and more and more past mistakes coming to light, it’s likely to get far worse.

Gordon Brown is a pretty nasty piece of work. Over the past three years, he has done everything in his power to prevent the Government having to provide financial help to the 125,000 people who lost their occupational pensions when their companies went bust. And every concession that has finally been made, every penny that has eventually been paid, has come only after a lengthy battle.

By the time this year’s Budget came round last month, the political pressure had become so intense that Brown finally conceded to enhance the grossly inadequate Financial Assistance Scheme (which he set up in 2004 to stave off another backbench revolt). However, his new and more generous package still fell short on just a few details.

For a start, one of the biggest problems with the FAS is that those who qualify aren’t getting the money quickly enough - some died before they saw a penny. As a result, the campaigners had proposed that an emergency fund be set up to help those most in need. Getting rid of archaic rules that force bust pension-funds to buy annuities for their members was another suggestion that would help the remaining cash in distressed pension schemes be released immediately.

And finally, while the new FAS will cap benefits at £26,000 a year, well above the £12,000 cap originally put in place, there is still no inflation protection - ensuring that pensioners’ incomes will be reduced in real terms every year.

The combined cost of sorting out these final niggles would be negligible. However, when the opposition parties laid down an amendment to the Pensions Bill this week, which would have dealt with all these issues in one fell swoop, the Government whipped its members to vote it down. Although several Labour MPs rebelled, the Government still narrowly won the vote - a political victory for Brown, but yet another blow for those who lost their pensions.

It’s sad that this issue has got caught up in Brown’s campaign to become the next Prime Minister, and disappointing that he didn’t realise he could have done the right thing and emerged looking compassionate rather than mean-spirited. Who knows; the public may even have started to believe in the cuddly image the Chancellor has been trying to cultivate by pretending that he listens to the Arctic Monkeys.

Although the Government began trying to fight off its responsibility to the 125,000 victims of this scandal by saying that it was not its job to underwrite private sector pensions, the precedent of this case is no longer very important. With the Pension Protection Fund in place, people who lose their pensions in future will have a lifeboat waiting to rescue them - funded by private, not public, money.

The real message that the Government’s stubborn stance has sent out is that, while it might be willing to send money to the other side of the world if there’s a natural disaster, it’s not prepared to put its hand in its pocket for its own citizens when their life savings have been washed away through no fault of their own.

This week’s defeated amendment still has life. It must be voted on in the Lords, and if it is upheld there, the Government will face yet another Commons vote. In the meantime, however, thousands of people struggle on without the pensions they are owed.

This is Brown’s chance to show that he has an ounce of compassion in him.

Hardly likely.

Over recent weeks we have seen a growing realisation amongst journalists and newspaper editors that Brown’s economic miracle is not all that he has promised, and that he is likely to leave a trail of destruction in his wake as his desperate gambles with the British economy begin to unravel over the coming few years.  The group was joined today by Larry Elliot in the Guardian who believes that Brown’s single achievement and selling point for his stay as Prime Minister, the economy, is not the “inflation proof show-stopper” that has been claimed.

Britain has become a giant offshore hedge fund in which the viability of the balance of payments depends on the City’s ability to gamble more successfully than its counterparts in Frankfurt, Tokyo and New York, and where an excess of cheap money has allowed consumers to feed their spending habit, either directly through their credit cards or by using their homes as cash machines. The result is an economy in which the financial sector is the main source of growth, and which is even more heavily skewed towards the south-east of England than when Labour came to power. The gap between rich and poor is growing too.

In his budget speech last month, Brown boasted that inflation since 1997 had averaged 1.5% during his stewardship of the economy, half the level of the previous decade. This week’s figures showed it running at 3.1%, and that’s using the yardstick for assessing the cost of living - the consumer prices index - that is most favourable to the government. Until 2003, Brown used the retail prices index excluding mortgage interest payments, and on that basis inflation is running at 3.9%. Indeed, had the chancellor stuck to his old measure, King would have had to use his fountain pen in three of the past four months.

Using the all-items RPI, still the preferred benchmark for pay negotiations, prices are 4.8% higher than they were 12 months ago. That has left the City convinced that interest rates will be raised by the Bank of England next month and that further increases may be necessary later in the year.

Brown would say that, even if interest rates were to rise to 6%, that would still leave them where they were when Labour came to power. The problem is, though, that Britain is now so heavily in debt that even quite small increases in borrowing costs could hurt. They will certainly affect political sentiment, not least because it’s a good bet that quite a few voters would themselves secretly admit that spending more than you are earning - be it at a personal or a national level - is unsustainable.

In the past, periods of excess have been followed by king-sized hangovers, and we may be in for some pain this time as well. Brown is reluctant to talk down the pound, which would be one way of boosting exports, and a different mix of monetary and fiscal policy - higher taxes to dampen down consumption, offset by lower interest rates and a lower pound - is a political non-starter at the present juncture, given the scale of the increase that would be needed.

New Labour is ideologically opposed to more innovative ideas, such as a two-tier system of interest rates that would discriminate between money borrowed for investment and that used for speculation. Nor has it done more than dabble with the idea that there needs to be radical reform of land and property taxation in the UK to keep the housing market in check. Having been blamed, unfairly, for single-handedly destroying pensions, Brown is hardly likely to lay himself open to the charge that he wants to do the same to property.

A decade ago, a more activist industrial strategy - perhaps giving support to Britain’s fledgling biotech and environmental industry, as provided by competitor countries for their high-growth sectors - might have helped rebalance the economy, but it’s a bit late now.

Instead, Brown’s arrival in power will coincide with an economic slowdown of one sort or another. Either the chancellor will be successful in his attempt to put the squeeze on pay, in which case below-inflation wage deals will lead to falling real incomes, or deals will be struck at about the current RPI inflation rate, in which case the Bank will have kittens at the prospect of a wage-price spiral and keep on raising interest rates until higher unemployment drives the message home. A good way to overturn a 15-point opinion poll deficit? I wouldn’t bank on it.

Happy Easter, Gordon!  As people all over Britain unwrap their chocolate eggs this morning, Gordon is discovering his very own sickly surprise as a Times/YouGov poll reveals that 57% of people think he is unfit to lead the country, after the damaging pensions trickery was revealed last week.  Only 41% thought he was doing a good job as Chancellor, down from 51% in March.  Meanwhile, over half of those polled characterised Tony Blair as “out of touch, untrustworthy and overly concerned with spin”.

Finance minister Gordon Brown, overwhelming favorite to succeed Tony Blair as prime minister, suffered a blow on Sunday when an opinion poll showed more than half of Britons thought he was unfit to lead the country.

In another setback for Brown, a newspaper said there was growing pressure for another member of the cabinet to challenge the Chancellor of the Exchequer for the leadership of the Labour Party when Blair steps down.

Blair is widely expected to quit in June or July after a decade in office. With no serious challenger yet emerging, Brown has been seen as a virtually automatic choice to succeed Blair as party leader and prime minister.

But some Labour politicians doubt Brown’s leadership credentials and opinion polls show he would fare badly against David Cameron leader of the main opposition Conservatives.

The Sunday Times said only 27 percent of 2,218 people questioned in a YouGov poll thought Brown was fit to be prime minister after a row last week over his handling of pensions. Fifty-seven percent thought him unfit.

The poll showed Britons were losing faith in Brown’s stewardship of the economy — his strong point until now.

Forty-one percent thought Brown was doing a good job as finance minister, down from 51 percent in March.

Not great for Gordon.  Meanwhile, it seems a serious challenger in the upcoming leadership contest could be emerging as John Reid has revealed that he will back a David Miliband led challenge to Brown’s bid for Number 10.  Gordon was hoping for a clear run to nextdoor, but now it is becoming increasingly clear that he may face a full leadership campaign, with all the dirty dealing revelations that is likely to bring out into the open.

John Reid, the Home Secretary, will back a Labour leadership challenge by David Miliband in order to stop Gordon Brown taking over, The Sunday Telegraph has learnt.

If Mr Miliband does not stand, Mr Reid is even prepared to fight the Chancellor himself as a “last resort”, friends have disclosed.

The revelations are a huge setback for Mr Brown’s hopes of taking over from Tony Blair, almost certainly at the end of June, as smoothly as possible.

They also offer the starkest evidence of the seriousness of the split between the Chancellor and Cabinet ministers who want to preserve the Prime Minister’s political legacy.

Mr Reid’s intervention means that Mr Miliband, the Environment Secretary, who was on a family holiday in France last week, is under the most concentrated pressure he has yet faced to run against Mr Brown, the overwhelming bookmakers’ favourite to be the next prime minister.

Mr Reid, seen as a potential candidate until a series of -crises at the Home Office, has been tipped as likely to remain in his job under Mr Brown. But that now appears impossible with Mr Reid ready, according to his friends, to act as Mr Miliband’s “standard bearer” inside the Cabinet and even to stand himself if no other credible challenger enters the fray. The decision raises the prospect of a Miliband-Reid “dream ticket” trading on the Environment Secretary’s youth and the Home Secretary’s experience.

“John wants David to stand against Gordon,” said a close friend of Mr Reid. “He believes he will do so - and that if he does, he can win. It will take balls to stand. But there is no use saying ‘wait till next time’, because there may not be a next time. John is making it clear he does not want to stand himself. He will be 60 next month. But if nobody else does, he will, as a last resort.”

The developments make it certain, for the first time, that a Cabinet-level challenger will declare he or she will fight Mr Brown. Any candidate must first obtain the signatures of 44 MPs, but friends of the Home Secretary say that would be no problem for either Mr Miliband or Mr Reid, such is the growing disillusionment about the Chancellor among backbenchers.

In recent weeks, according to senior Blairites, the party’s private polling has shown the Chancellor’s popularity falling badly among voters - particularly after his 2p cut in income tax was denounced as a Budget “con trick” by the Tories and he was found to have acted against warnings from his civil servants in his decision to launch a “raid” on pension funds in 1997 which has cost them £100 million.

Ministers close to Mr Blair also believe the next Labour leader should be English. They suggested that Mr Blair feared that Mr Brown would “wreck” New Labour’s achievements.

Slippery Gordon Brown had his “get out of jail free card” ripped up yesterday, when documents released by the Confederation of British Industry showed that they never supported his tax raid on pensions, as he had previously claimed.  The CBI released their 1997 budget submission to the chancellor, which is recounted below.

“It is widely thought that the Government might restrict, or even abolish, the tax credits attached to dividends. The CBI would oppose this measure.

“This change in isolation would raise money for Government at the expense of businesses and shareholders (taken together), cutting the funds available for investment. The move would cut the actuarial value of pension funds which would need to be compensated at least in the case of defined benefit schemes.

“This would require higher payments of dividends from the companies the funds own, or higher employer contributions. Far from leaving businesses with more retained profits … the move could have the opposite effect.”

The fall out from the disasterous tax grab by Gordon was made crystal clear by Mike Warburton of Grant Thornton accountants, who said:  “The Chancellor’s tax raid will cost pension funds another £7 billion in 2007-08. From an actuarial point of view he removed between 10 per cent and 20 per cent of the value of pension funds at a stroke.”

The pain continues for Gordon today as readers of the Telegraph are asked to comment on how the Great Pension Robbery Of 1997 will affect them.  The sentiment is clear for all to see, and it’s not pretty.  It must be plain to all but the most backward members of the general public now that Brown has created a crisis waiting to happen by raiding our future to pay for his.  The Labour Party will surely soon realise Gordon is a lame duck candidate and a non-starter as Labour leader and Prime Minister.  Who knows what damage he could do if he ever makes it as far as nextdoor?

Some of the comments by Telegraph readers are shown below to give an impression of just how anti-Gordon the public is becoming:

Mr Brown should face criminal charges for stealing £100bn of pension funds from us over the last 10 years.
He is a duplicitous serial offender from whom we have no protection.

…

I am age 68 and it looks as if I will need to work to age 75 in order to erase the damage made to my pension by Mr Brown, I ask the people of England, do we want this man in charge of us ?. I think not.

…

The RECENT REVELATIONS with the release of the ’suppressed’ treasury documents show just how completely Gordon Brown is unfit for high office. I had always assumed that his disasterous decision to abolish the tax relief on pension fund investments was due to incompetence. Now I realise just how callous the man is. Along with millions of others my pension fund will be worth at best half of what I had expected when originally planning my retirement. The number of families destined to have a much poorer quality of life in retirement can directly lay the blame on one person. Adding ’salt’ to the wound is the realisation that his generous pension postion is not only ‘ringfenced’ but will be paid for by his many victims.

…

This is a disgrace. He ignored advice and has ruined, or will be responsible for the ruin, of the lives of nearly everyone in the country except for foreign immigrants. In better times this would have been a resignation issue. I expect we wont even get an apology. Blame the CBI? Like all New Labour they blame everyone but themselves and take responsibility for nothing.

The above are just a handful of the 250 comments that the Telegraph website has received on this issue at the time of writing, universally condeming Gordon Brown for his out-and-out theivery.

Gordon’s “hand-in-the-till” tactic of abolishing tax credits on dividends in his 1997 budget seems to be coming back to haunt him 10 years down the line.  The CBI have complained that Brown was warned at the time that such a stunt would cause a £100 billion black hole in pensions, and that this prediction appears to be coming true.

Gordon Brown’s decision to abolish tax credits on dividends was a “misjudgment”, according to Richard Lambert, director-general of the CBI employers’ body, who said on Sunday that the move had weakened occupational pension provision.

Mr Lambert, a former member of the Bank of England’s monetary policy committee, said the scrapping of tax relief in Mr Brown’s July 1997 Budget had made “a significant contribution to the weakening of the country’s occupational pensions platform”.

“There was a misjudgment by the chancellor,” he told the Financial Times. The CBI had privately warned the Treasury at the time the move was “not a good idea”.

The Tories have claimed that Brown deliberately attempted to bury the bad news of the release of the documents under the Freedom Of Information Act by releasing them just after the start of the commons easter recess:

There were suggestions, denied by Treasury officials, that the chancellor might have been seeking to prevent a more damaging disclosure later - possibly in the middle of the contest for the Labour leadership that is expected to see him succeed Tony Blair.

Another sly piece of trickery from the tricky sly chancellor we have come to know.  But the real bad news for Gordon came today when it was revealed that he could face a Treasury Committee enquiry into why he chose to ignore the warnings and push ahead with the tax rises anyway:

A possible investigation by the influential Commons Treasury committee into one of the most controversial actions of his decade as Chancellor threatens embarrassing publicity during his leadership campaign this summer.

The Tory MP Michael Fallon, deputy chairman of the Treasury Select Committee, said yesterday that he will propose an investigation into Mr Brown’s 1997 decision, which ultimately cost pensions an estimated £100 billion and contributed to the collapse of hundreds of schemes.

Mr Brown could be summoned to testify to the Committee on why he went ahead with the tax change, despite explicit warnings from Treasury economists that it would result in a huge chunk being taken out of retirement savings.

Labour sources acknowledged last night that any suggestion Mr Brown was personally responsible could further dent his appeal at a time when polls already suggest he is less popular than David Cameron, the Tory leader.

John McFall, the Labour MP who chairs the committee, said he would decide on the matter in the coming weeks, but pressure is mounting at Westminster for Mr Brown to answer for his abolition of the dividend tax credit.

Things are slowly falling into place ahead of the Labour leadership election, which seems likely to prove a fairly rough ride for Gordon.

Several stories are appearing in the popular press today reporting that Gordon Brown may be forced to include the estimated £530bn shortfall in the state pension fund in his overall figures for the national debt. This would, when added to our existing national debt of £478.6bn, take the total national debt over the 1 trillion mark. In terms of GDP this is an increase from 40% of GDP to almost 100%. In fact, it turns out the situation may be even worse, as some believe the £530bn estimate from the government is rather on the low side, and the real figure is closer to £960bn.

The real story here is not really about an increase in national debt, however. Future pensions payments are not really a debt, but a future liability, i.e. a commitment by a government of future benefits to the general population. This is also sometimes termed an ‘implicit’ debt. Real debts are those which require repayment, such as the bonds issued to banks by the government every year to fund their day-to-day expenditure. As such, implicit debts have usually not been included in overall national debt figures. The reasons for this are twofold. Firstly, it is non-trivial to obtain a decent estimate of the future pensions and wider benefit liability, as it depends on several factors such as projected population, lifespans, people taking out their own private pensions and the overall profile of the retired population. Secondly, until recent times it has not been such a huge amount of money to be significant enough in comparison to the level of immediate debt.

The implication, therefore, of the suggestion that these figures should now form part of the overall debt calculation, is that the size of the gap in the state pension fund has now reached such alarmingly large proportions as to have transitioned from its previous status of a side-issue to become a very real and burning central issue in public finances. In other words, it’s getting so big that we really need to start thinking about it. Of course, nobody has yet come up with any workable solutions to this problem, and the government appears to be firmly stalled at the initial panic stage.

The CIA world fact book lists the UK as 63rd amongst 114 countries in rank order of national debt as a percentage of GDP, on 43.1% (although one of Gordon Brown’s “golden rules” is that this figure should be kept under 40%). In this respect we are currently fairly well positioned, but it will be interesting to see how this ranking order would be affected if all countries’ debts were recalculated to include future pensions liabilities. Considering the UK has one of the worlds longest running pension schemes, a larger welfare state than many other countries, and an ageing population, I would not be surprised if we find ourselves a bit higher up the ranking order than before.