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Thought on a new chancellor

It must be scary taking over from Gordon Brown. The new prime minister knows where all the bodies are buried in the Treasury building, and will clearly still have a huge interest in what goes on there. He has also taken a handful of influential Treasury officials with him.

So Alistair Darling's first management task is to oversee the Treasury itself, where most of the staff now have only known life under Gordon Brown.

On policy, the immediate task is to complete the comprehensive spending review to be published in autumn, setting out budgets for the next three years. Mr Brown has bequeathed to Mr Darling tight spending limits, which his replacement will obviously have to stick to. It's a more difficult spending round than any this government has had to face.

But most significant for the new chancellor is the fragile economic background - we're adapting from life with interest rates at four point something, to rates at five point something; or maybe six.

The last decade has been one of low interest rates, low saving (and high borrowing), high consumer spending and high asset prices. This has all seemed to hinge on the gift to the UK of global dis-inflation - as China and others have exported ever cheaper manufactured goods to us.

The problem is that the China effect hasn't been working in recent months, or at least not sufficiently for us to carry on with an economy getting a low interest rate boost from the Bank of England.

Hence, rates have gone up and slowly, the British consumer seems to be adjusting. Fixed rate mortgages taken out two or three years ago at 4%, are being renewed at 5.5%.

While things may go very well over the next three years, and while we may be able to adapt to the higher interest rates very smoothly (indeed, that's where most economic forecasts see us going in the years ahead) things may go wrong too.

So we've gone from what Mervyn King calls 'the nice decade' - which, to some extent, coincided with the Gordon Brown decade - to the possibility of a slightly less nice decade. It doesn't have to be horrible, but we don't know what it will hold. And there may not be very much Alistair Darling can do about it.

But there will be one big change in government to cope with the challenges of the next few years. Under Blair and Brown, the Treasury has operated as a semi-independent fiefdom, at times at odds with Number 10. No longer. With Alistair Darling and Gordon Brown, you 'll know who's in charge, and they'll both be facing in the same direction.

Comments   Post your comment

  • 1.
  • At 03:20 PM on 28 Jun 2007,
  • Rob wrote:

It will be interesting to see how independent the treasury will be with Gordon in the PM's seat.

  • 2.
  • At 03:27 PM on 28 Jun 2007,
  • Mark Parker wrote:

Do you think Alistair Darling will treat Gordon Brown like Gordon Brown used to treat Tony Blair, refusing to show him the budget until the morning before, etc?

  • 3.
  • At 04:12 PM on 28 Jun 2007,
  • Dave Webber wrote:

Out of the whole Blair-Brown agreement, Darling's probably got the raw end of the deal...having to follow on from Brown. With the tight spending round, and inflation creeping upwards, how he probably wishes it was Brown on his way to the Middle East, and not Blair.

With Brown taking a number of senior Treasury wonks with him, Darling has to put his own mark on the place. That he probably wouldn't mind, if his predecessor wasn't also his next door neighbour.

  • 4.
  • At 04:21 PM on 28 Jun 2007,
  • Thomas Lowry wrote:

Wouldnt it be nice if the eletorate had a say in who gets these jobs, like an election for instance. I can only think that things will get worse now just when we thought they couldnt.

T L

  • 5.
  • At 04:43 PM on 28 Jun 2007,
  • Dave Webber wrote:

"Wouldnt it be nice if the eletorate had a say in who gets these jobs, like an election for instance. I can only think that things will get worse now just when we thought they couldnt."

In an ideal, purely democratic world, yes, but Thomas, given the present state of affairs, do you really trust the electorate with a decision like who to run the economy? With just over half of Britons bothering to vote anyway, I'm not sure many more would bother to vote on who should be the new Communities Minister...

Besides, this is exactly why politicians are elected - to make these decisions on our behalf. Where would it end? If we agree/disagree with those choices, let 'em know at the ballot box.

Politicians like GB talk about engaging with their electorate...when if the truth be told, a sizeable chunk of the electorate don't want to be engaged with, often dismissing their politicians as "all the same" in one breath, and failing to name their local MP in another.

A slight (!) diversion from Evan's original post, and apologies for the lack of economics!

  • 6.
  • At 05:06 PM on 28 Jun 2007,
  • Roger wrote:

Would Thomas Lowry really like an election to decide who gets which ministerial job? What do you reckon the turnout would be?

  • 7.
  • At 05:20 PM on 28 Jun 2007,
  • Peter Runcorn wrote:

Brown has left a legacy of hidden debt for many Chancellors to come from PFI. Darling may be the first one to have to deal with this long-term, costly debt, and it might involve cutting spending, or higher taxes. That won't be popular with anyone, obviously.

Otherwise, Brown has left Alistair Darling with a reasonably sound economy. How much of that is up to Brown is a different matter.

  • 8.
  • At 09:26 PM on 28 Jun 2007,
  • Len Leadbeater wrote:

Brown has had a soft ride over the last ten years, with Ken Clarke starting the ball rolling, sorting out some basic problems and global factors in our favour. The question is where has all the money gone. It has gone down the toilet while the "Great Carpetbagger" and the Scottish Presbyterian Socialist lived next door to each other, each vying for the title "Neighbour from Hell." So far the new PM is talking as though he had been living on Mars for the last ten years. So here we go on another round of reforms. If it all needs reforming what have they been doing for ten years. It didn't take long for the House of Lords reform to come into play and one of the PM's buddies gets a job in goverment as Lord Somebody. No wonder they don't want an elected second chamber/upper house.It would have been nice if they'd asked us what we think. Don't be silly that's not in the constitution. It's probably just a need to reorganise things so that it will be easier for existing arrangements to operate more efficiently. That sounds familiar.

  • 9.
  • At 10:04 PM on 28 Jun 2007,
  • sweetalkinguy wrote:

Blair chose the time of his departure. He did not choose it to ensure that Brown has a smooth takeover or to enable Brown to move on to greater glory. It is fair to assume that Brown has done what he can to ensure that the economy will continue to perform as it has been doing. At any rate, he will still have arm's length oversight. It is hard to see beyond the negatives. Brown has pledged much greater expenditure on aid and overseas development. Commitment to EU funds will be greater. The wars are not going to get any cheaper any time soon. Then there is the bottomless pit of NHS PFI deals and the discredited computerisation project. The pledge to rebuild schools. The cost of infrastructure projects, including the Olympic Games. There is a great deal of expenditure to be found, which will have to be matched by taxation or borrowing. This is the juggling act that Darling has. His skill at keeping the balls in the air will determine whether Labour is elected next time. Therefore we can expect Brownian oars in the water. We will find out whether it has been a dazzling construction, or a house of cards secreted by smoke and mirrors.

  • 10.
  • At 02:36 AM on 29 Jun 2007,
  • Paul wrote:

The finest Chancellor in British history has now moved in to Number 10. I doubt we we will ever see a finer occupant at Number 11 than the Iron Chancellor Gordon Brown.

I wish him luck in his new job, hope he makes his mark as a great prime minister and hope he will keep an eye on the Treasury and step in if need be.

I am not saying that Darling should not be trusted, but I am saying that Mr Brown should monitor him closely, especially in the next couple of years. He should also give Darling advice if he needs it and not be afraid to tell Darling that he is doing something wrong.

Above all, he should have a friendly relationship with him. But, as prime minister, he needs to show that HE is in charge and he can take over if need be.

If he can do all these things, I will have even greater faith in him, and I would consider voting for Labour.

  • 11.
  • At 08:18 AM on 29 Jun 2007,
  • bill wrote:

Poor darling - fancy being in nominal control of his department. He hasn't a hope

  • 12.
  • At 09:30 AM on 29 Jun 2007,
  • Unspun wrote:

Gordon Brown has get out just in time as interest rates are set to hit 6% by the end of the year with the consequential impact on the UK's £1.35 TRILLION worth of personal debt(highest debt per capita in the whole world). Add to that fat increasing government borrowings (national debt of over £550 billion, PLUS £100 in PFI liabilities and several hundred billion of pounds in state pension liabilities), the economic outlook looks pretty tough for Alastair Darling. And Gordon has sold most of the gold reserves !!! and there is pretty much nothing left to privatise !!! Let's hope that house prices don't crash .....

  • 13.
  • At 11:11 AM on 29 Jun 2007,
  • Maggie King wrote:

If Gordon decides to let Alister do the job without 'input' from himself it could work well. He should understand what it takes to juggle the books and it is an opportunity for him to demonstrate his faith in the people he has chosen. perhaps if Alister's eyebrows go white in the near future we will know he's under stress!

  • 14.
  • At 12:21 PM on 29 Jun 2007,
  • Greg wrote:

Whilst many are describing the new chancellor's position as a poisoned chalice, it is also an incredible opportunity for Darling.

Expectations are largely low and the school of thought is that Brown will want to closely monitor day to day running. However one suspects that once Brown starts to discover the time pressures of running the country from the front seat rather than the back, his control will wane. What will not wane however are his demands on where money should go, and over the overall total budget. Brown may not have made Labour policy for the past 10 years, but his strict control and power meant that he certainly shaped it.

Darling's task will be made easier in that for all his talk, Brown cannot now afford to be a spending reformer as Blair made himself out to be - nothing he could do in this regard would have enough time to realise a positive effect in the polls. So I'd expect a period of consolidation with reduced spending, keeping an even keel in the Treasury whilst Brown takes 2 years to re-announce old initiatives dressed up to be something else to try and win over a skeptical public.

It will be an interesting time as well, because Brown is in the unforutnate position now of being open to attack from two fronts. One is from anything financially related - a strong opposition can point the finger of blame at his years in control and the second is whatever else happens whilst he's heading the government.

It will only take one or two bad news messages that capture the public eye and they can undo twenty or thirty proud announcements of change of policy.

Ironically, the only way in which Brown could be secured of an election win would be for Darling to be brave and undo all of the cumbersome and expensive tax credits fiasco and bring real value to the public at the expense of cutting public service employment. But I doubt this will happen so what we're going to be left with is 2 years of short term election winning politics and policies which will not take the country forward and which will be undone the minute the election is over no matter who wins.

Do the decent thing Brown - call an election before the end of the year - you're chances are probably better than 50 / 50.

  • 15.
  • At 01:32 PM on 29 Jun 2007,
  • michael mckenna wrote:

Alister Darling, althoiugh very loyal, is also very much his own man,he will treat this job like any other he has had,he will always give you 100% in the quiet and controled fasion we have come to expect from him.

All The best. Michael McKenna.

  • 16.
  • At 06:50 PM on 29 Jun 2007,
  • John Straker wrote:

If nothing else it get peoples attention and maybe some involvement with politics. This can only be a good thing as politicians live apart from the real world in a cosy club all of their own making.

  • 17.
  • At 08:08 PM on 29 Jun 2007,
  • michael k foster wrote:

I think a substantial drop in house prices would be a good thing.
About 40% should do it.

  • 18.
  • At 10:11 PM on 29 Jun 2007,
  • John wrote:

Gordon Brown has left the Treasury just in time! Much of the 'growth' in the economy over the past 5-6 years has been due to excessive personal borrowing - a result of ridiculously low US interest rates, which we had to follow. These rates were set after the bursting of the tech bubble by Gordon's mate Alan Greenspan. That period is now ending and people will realise that they aren't really any better off by paying a larger and larger chunk of their income in mortgage repayments. Add to this the increasing burden on public finances by the 'off balance sheet' PFI deals.

Good luck Mr Darling...

  • 19.
  • At 10:25 PM on 29 Jun 2007,
  • Simon Turner wrote:

If Gordon Brown is "the finest Chancellor in British history", then the bar must be set incredibly low. The one and only real success for the Treasury - arguably the whole Government - over the past 10 years has been to pass responsibility for monetary policy to the Bank of England. The rest has been pretty much a fiasco of badly thought out policies very poorly implemented at exorbitant cost - think working families tax credit, the pension 'raid', Stamp Duty on houses hiked to 5% (at the top end, admittedly, but the knock-on effects are felt all the way through the housing chain) which has done much to accelerate the housing price boom. No, Gordon's best achievement has been to hand over to someone who can.

  • 20.
  • At 11:26 AM on 30 Jun 2007,
  • Andy Peaple wrote:

How can anyone say that Alistair Darling has been left with a "sound economy"? The economy has been run on cheap credit for the last 10 years. The previous BoE governer stated himself that they deliberately reduced rates in 2001 to avoid UK PLC going into recession.

I think the time is now coming for some serious payback. The UK economy is analagous to Wyle E Coyote running in the middle of the air above a huge cliff, his disbelief is the only thing that keeps him from falling.

I would recommend that we all get into the brace position.

  • 21.
  • At 12:58 PM on 30 Jun 2007,
  • Geoff Berry wrote:

Evan,

Thought provoking article, clean and very neutral, but you omit to mention the Brown desperation politics.

Last October the putch against Blair sponsored by Brown was to designed to give Brown the opportunity to get out of the Chancellors job before everything goes pearshape. Whilst nobody denies Brown had the ambition to become PM the signs of a slowing economy and wasteful government spending and increased borrowings had become obvious.
See yours, Peston, Crick and Robinson and others regular articles.

Brown has been the unchallenged architect of the governments failed
domestic poilicies for 10 years, never let that be forgotten, he has caused a lot of grief. Education, NHS, Law and Order, Immigration, Housing, Pensions, Transport have all been, politically determined, financilly targetted and budget controlled directly by Brown

He has now bolted to the PM 'god-box' and I hope our media have their reality boots on. The UK public will not be fooled by the ongoing spin of a second New Labour PM and expect that Brown should be exposed regularly by the media for his failures of the past 10 years.

There are too many nice boys in the opposition, please do their job.

  • 22.
  • At 06:07 PM on 30 Jun 2007,
  • Robert Twizell wrote:

I'm intrigued, but not surprised, that Ed Balls, so close to Brown during the last decade and so important in forming economic policy has been moved out of the treasury at this point.

In many ways he was thought to be the 'Chancellor Elect'

No doubt both Ed and Gordon will be glad to be deniably distant from the economy as we pass out of the nice decade into a period marked by falling house prices and the end of a bubble they did apparently little to prevent and a lot to support through their role in undermining faith in the pension system.

  • 23.
  • At 06:15 PM on 30 Jun 2007,
  • Deepak Chawla wrote:

Remember Railtrack got insolvent that is the history of Alistar Darling. Then he was kicked out.

Now my prediction, he would be out of the job by dec 2008. One of the reasons being dirty credit policies are coming to roost all over the world esp. US.
Interest rates will go up and UK economy which more based on valuation rather than substance will have a small burst.

Also Brown, will be on the back of him and not let me do his job properly.

Economy got Brown into the office and Economy will get him kicked out.

As economists would say all other things remaining constant. :)

  • 24.
  • At 10:59 AM on 01 Jul 2007,
  • Barry Johnson wrote:

I think your reporting is absolutely spot on.
The main thing that seems to me that not understood by supporters of Brown is that all tax is a tax on people and in one form or another impacts the amount of money in their pocket.
If that message was understood then there would be less acceptance of the Brown taxation regime.

  • 25.
  • At 05:24 PM on 01 Jul 2007,
  • Lalit Shah wrote:

I am surprised at he generally introverted comments above.The source of UK's economic difficulties are not likely to be internal issues like unfunded pensions, or funds for schools reforms, etc. The problems in the next 18 months, will come from the costs associated with hand-holding Mr.George Bush in Iraq, Afghanistan, and, in all probability the addition of Iran to that list. At that stage oil will jump to $100 plus. The resulting inflation will take interest rates to 7.5% or 8%. Then even cosumers in their thirties will talk of the "Good Old Days"!
It is thus more likely that Mr. Brown, and not Mr. Darling, holds the key: To be a poodle or not to be!

  • 26.
  • At 06:27 PM on 01 Jul 2007,
  • Wendy wrote:

If the Government want us to save for our retirements let's hope that the new Chancellor will do more for savers and protect more of our savings from plunder by such things as the dreaded Council Tax which is totally unfair ~ as it is people who use local government services and not the buildings they live in. Also to think again regarding the abolition of the 10p rate of income tax. For that does no more than take more in tax from those who can least spare it. If the 10p rate is to be abolished then raise the threashold at which tax is paid! Now THAT would do far more to help those on low incomes.

  • 27.
  • At 04:06 PM on 02 Jul 2007,
  • Chris wrote:

* 17.
* At 08:08 PM on 29 Jun 2007,
* michael k foster wrote:

I think a substantial drop in house prices would be a good thing.
About 40% should do it.

You could move.

So what would cause such a drop? Mass unemployment or interest rates going up to say 15%; in what way would that better for anyone?

  • 28.
  • At 11:59 PM on 05 Jul 2007,
  • Stevo wrote:

Chris, interest rates at 15% would at least wake everyone up from their consumption dreamworld.
The bottom line is most people have done NOTHING to deserve their excessive house price rises.
It's pure speculation and needs to be stopped asap lest the drop be even worse.
House owners are the most greedy, blinkered idiots imaginable. They even want us to literally bail them out of the floods. Nobody is propping up my assets. Why should my taxes help you with your assets?
Get some insurance instead of a new pair of shoes.
The floods are a gr8 analogy for what is going to happen to the economy. Tough.

  • 29.
  • At 12:38 AM on 09 Jul 2007,
  • Pauline wrote:

Out of all the government changes of late, I have not heard one of them mention OLD AGE PENSIONERS.
I wonder if the new Chancellor will bring us all up out of the doledrums, and also bring us up to date on our income. At present we have less than a 16 year old School leaver is entitled to at their first ever job. Don't forget we Pensioners have bills to pay, and homes to keep, the average 16 year old doesn't.

  • 30.
  • At 01:16 PM on 23 Jul 2007,
  • Andy S wrote:

Pauline (Comment 29)OK so let's talk about Pensioners. I've never worked out why old people couldn't save for their winter fuel like everybody else. It's not like winter is a great surprise (or maybe it is to some people?).

As for the Pensions farce, I think it's time for The Who to release the My Generation remix.

  • 31.
  • At 08:22 AM on 24 Jul 2007,
  • Keith Baldwin wrote:

The new Chancellor has his hands firmly tied behind his back as GB set all the parameters before he left, certainly up to the final date for next election. His "fiscal drag" on nearly every public tax will continue to reel in more & more money for paying out on public service staff benefits(who will still be able to retire at 60 and not 68) while the paying public wonders when the squeeze will end - it won't. Who is in charge of the Treasury, who do you think - GB. Darling is the fall guy if things go wrong, who will then be elevated to the Lords whatever happens.

  • 32.
  • At 05:50 PM on 17 Aug 2007,
  • Mark Neilson wrote:

I'm happy to see all regressive taxation abolished; including the most regressive BBC licence fee. Well Evan? What do you have to say?


  • 33.
  • At 06:12 PM on 17 Aug 2007,
  • John Kirkham wrote:

On the 6 pm BBC TV news this evening some joke of a reporter managed to link the ups and downs in the stock markets to the Conservative's suggestion to abolish Inheritance Tax. Davis was on straight after that comment and I would have hoped that he might have questioned that non-existent link. Davis talks sense, but where do these clowns who masquerade as financial/economics commentators come from. The BBC is a crass organisation.

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