Gordon Brown is back. Again. Earlier this week, to mark the tenth anniversary of the financial crisis, the former prime minister treated us all to another nakedly self-serving political intervention.
The world is “leaderless” and “sleepwalking” towards a second economic crash. New Labour “did not know what was going on” in Britain’s financial sector in the run-up to 2008. Tory austerity was a mistake. Politicians must resist retreating into “nationalist silos [of] populism and protectionism.”
There’s nothing particularly controversial about Brown’s first point. He is right to flag-up the risk of another crisis – although he’s hardly the first person to do so. It’s everything else he says that I find problematic.
To be clear: Gordon Brown bears a sizeable share of responsibility not just for the 2008 crisis itself, but for the catastrophic mishandling of its aftermath and for the current atmosphere of nationalist toxicity in British public life.
Let’s start with New Labour’s relationship to the UK banking industry.
In 2001, the Blair-Brown government established a new Financial Services Authority (FSA) designed to streamline regulatory constraints on the City of London and consolidate the UK’s global “competitive advantage.” The FSA swallowed up nine separate bodies into a single agency in order to provide – as Brown boasted at the time – “not only light but limited regulation” of British banks.
The result was a spectacular failure of oversight. Britain’s regulatory watchdog wasn’t properly equipped to discipline the banks if it suspected them of doing something wrong. In fact, perversely, its chief function was to make life easier for them.
What’s more, in 2009, FSA head Adair Turner told a parliamentary committee that the agency had come under political pressure to further loosen restrictions on financial institutions. “There was a philosophy rooted in political assumptions which suggested the key priority was to keep it light rather than to ask more questions,” Turner said.
There is, of course, little doubt about who was applying that pressure or why. This is what Brown told the City in June 2007, three months before the collapse of Northern Rock:
“I want to continue to work with you in helping you do [your job], listening to what you say, recognising your international success is critical to that of Britain’s overall, and considering together the things that we must do to maintain our competitiveness: enhancing a risk-based regulatory approach, maintaining our competitive tax regime, and [keeping] our main rate of corporation tax the lowest in the G8.”
So the suggestion that New Labour was blindsided by City malfeasance doesn’t stack up. On Brown’s watch, the government did everything it could to encourage risk-taking behaviour within Britain’s already dangerously over-sized and unruly financial sector.
Brown is equally culpable for the austerity regime that came into force in 2010.
Granted, he was one of the leading global advocates – alongside Barack Obama and the US Federal Reserve – for stimulus spending as an immediate response to the crash. And, had he won the 2010 general election, he wouldn’t have cut expenditure as recklessly as David Cameron and George Osborne did.
Nonetheless, Labour’s 2010 manifesto was crystal clear: from 2011 onwards, deficit reduction would be the government’s overriding priority. Indeed, Brown went into the election pledging a series of “tough choices” on Britain’s national finances. These included £15bn worth of “efficiency savings”, £11bn worth of “operational efficiencies”, a public sector pay cap, welfare reform, an increase in National Insurance contributions, and £20bn worth of “asset sales” – or ‘privatisations’ to you and me – by 2020.
Moreover, Brown’s tenure as chancellor was characterised by an intense PR obsession with ‘fiscal prudence’ and ‘budgetary discipline.’ He may have significantly increased key aspects of social spending, but he did so by balancing the increases out with tax hikes in order to limit debt, run annual surpluses, and manage inflation.
Ultimately, Brown’s sensitivity to the charge that he was financially irresponsible lent credibility to Osborne’s later (manifestly false) claim that Britain had to eliminate its deficit before it could return to economic health. In other words, many of the major decisions Brown made at the Treasury framed and reinforced the political rationale that Cameron and Osborne used to justify austerity.
Which brings me to my final point. Brown did a lot of ideological grunt work for the right in terms of the economy and spending cuts. But he shamelessly bolstered its social and cultural narrative, too. In and out of power, Brown has repeatedly appealed to the worst atavistic tendencies of the UK electorate.
On a trip to Tanzania in 2005, he told reporters that the UK should “celebrate” its colonial past. In 2009, he argued that “British jobs” should be reserved for “British workers.” And as recently as June of this year, he was calling for a crackdown on immigration as part of a broader package of policies to help “address people’s anxieties” over Brexit.
All of this highlights the emptiness and cynicism with which the ex-chancellor is currently trying to salvage his political legacy. He wasn’t duped, as he now claims, by the criminality of the UK banking sector – he enabled it. He wasn’t opposed to austerity – he championed it. And he doesn’t find populist language unsettling – he uses it himself when it suits him.
Brown might be right about the inevitability of another economic crash. But if we want to handle the fallout from the next crisis more effectively than we did the last one, he is absolutely the last person we should be listening to.