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Gordon Brown, the shadow chancellor, has set tough targets on spending, borrowing and inflation. Good economics, but will it prove good politics?
ONLY with the last of Gordon Brown's series of pre-election speeches on Labour's economic policy, given at a business forum held by The Economist and the Centre for Economic Performance, did the final pieces of Labour's macroeconomic jigsaw slot into place. "Our aim is inflation of 2.5 or less," said Mr Brown. This, it so happens, is precisely the same as the government's target for the end of this Parliament, a target which it looks like missing.
Mr Brown also unveiled the machinery Labour plans to set up to meet that target. The Bank of England is to acquire a new monetary policy committee, in which four of the Bank's current bosses and three or four eminent outsiders on fixed-term contracts will give advice on monetary policy.
The present monthly meetings between the chancellor of the exchequer and the Bank's governor will be held on dates fixed well in advance to avoid political manipulation, and any decisions at those meetings to change interest rates will be implemented at once. If the Bank then demonstrates a successful track record in its advice-how is not explained-it can even look forward to "operational responsibility for setting interest rates." And then there is the possibility of entry into a European single currency, for which Mr Brown set out clear economic criteria, which would further constrain Britain's monetary policy.
Moreover, Mr Brown reminded his audience of the commitments he has already made on state borrowing. Over the economic cycle, a Labour government would observe the "golden rule" that...