It is easy now to pin the blame solely on Gordon Brown. To those who knew him before 2007, it was obvious that he is no leader. That is why support for him, even (or especially) within the Parliamentary Labour Party was, and is, so lukewarm. With his dithering and micromanagement, the only thing he was, and is, good at, is bullying and blackmailing to gain and retain power. But whilst Gordon Brown can be justly condemned for mismanaging the UK economy as Chancellor, we shouldn’t forget that the real villain of the decade is Tony Blair.  In many ways a more natural leader, it is Blair who not only failed to deliver on the all the bold promises he made back in 1997 but who allowed his Chancellor to create an illusory economic bubble, who recklessly followed George Bush into Iraq, who stoked the terrorist threat whilst depriving us of our human rights, and who ignored the implications of global warming. Many of us were taken in by his charismatic grin and hoped that “it would be alright in the end”. With the benefit of hindsight however, it is clear that every path he took us down was, at best, a dead end. Whilst we bear the costs of his ill-conceived adventures, Blair is now reaping the financial rewards of the celebrity culture he helped create.

For all their promises of prudence and fairness, the Labour government grew the UK economy through a twin pronged approach of unleashing the financial services sector and encouraging consumer spending (and indebtedness).  As the City was given a free rein with light touch regulation, the rest of the productive economy has been increasingly hamstrung by bureaucracy, regulation and an unequal talent battle with the financial and public sectors. An early consequence was the growing economic disparity between London and the rest of the UK and the rise of the “super-rich”. The other beneficiary was the public sector. The inflated tax receipts generated by the City enabled a massive growth in public sector spending and employment. Almost a million more workers are now employed in the public sector, compared to 1997, and only a small percentage of these jobs are in important front line roles such as doctors and nurses. Many public sector workers, especially in senior admin roles, enjoy higher salaries and benefits than their private sector colleagues. Gordon Brown brazenly ignored his own rules by running a large deficit at peak of the economic cycle to fund this expansion. 

When the global financial crisis, for which the government must take part of the blame, happened it is little surprise that the result was the worst budget deficit of any developed nation and a recession from which we are the last G7 country to emerge. We are lucky that many businesses have learned from the past and through more flexible working practices have made fewer redundancies than in previous recessions. But the Government appears to have learned nothing. In an attempt to provide another unsustainable short term boost, it encouraged consumer spending once again through the temporary (and administratively costly) reduction in VAT whilst doing little to help those parts of the economy which create sustainable long term value. Companies are discouraged from hiring because of higher National Insurance costs. Income tax increases, intended to hit Labour’s former friends in the City (but who are the most mobile and able to avoid punitive taxes), will hit hardest the entrepreneurs on whose efforts the country depends to get out of the current mess.   

Albeit in the shadows of the seemingly all powerful United States, the UK at the start of the decade possessed diplomatic and military credibility which matched or exceeded its economic strength. But after 9/11, Blair’s strategy of making the UK a “bridge” between the US and Europe failed totally. Blair confused the special relationship with subservience and in effect encouraged the US’s ill-fated invasion of Iraq. Whilst we may dispute at length the legality of the war and whether Blair deliberately misled the House of Commons on the reasons for war, the longer term consequences for the UK (and US) have been catastrophic: distracted by Iraq, we failed to complete the intervention in, and stabilisation, of Afghanistan; we fuelled anti-Western sentiment in the Muslim world, exacerbating the terrorist threat and reducing still further any prospects for lasting peace in the Middle East; we overstretched our military resources; and we have lost to the state many of our hard fought for liberties.   Blair had also claimed to put Britain at the heart of Europe but ended with few friends there (so clearly demonstrated by his failure to secure the European Presidency). Labour frequently warns that the Conservative policy would forfeit Britain’s influence in Europe, but it is impossible to see what British influence under Labour has gained Britain or Europe other than the elevation of an unknown and unelected baroness to the lofty heights of EU High Representative. Ten years on the EU is no better positioned to deal with the real problems of the 21^st century. Bureaucracy rather than effective action, so clearly demonstrated in Copenhagen last month, continues to be the order of the day.

Whatever doubts about global warming may exist, the risk of inaction is colossal. Very little in life is 100% certain and by the time we achieve this certainty it will be too late to act. It is certain that there is a limited supply of fossil-based fuels and reliance on many of the remaining global reserves will eventually make the UK vulnerable (as many other countries already are). None of this is new and yet the UK government over the last decade has done almost nothing to tackle the long term problem. Despite the talk, Tony Blair showed no interest in taking concrete steps to deal with the issue until the government was shamed into limited action by the Opposition. Unlike in other European countries, there has been little significant government support to encourage renewable energy. Potential world-class green technology start-ups have struggled to overcome government red tape and obtain sufficient funding. When public finances could have afforded a major investment in rail infrastructure, little investment was forthcoming. The government dithered endlessly about the expansion of nuclear power and failed to take brave decisions early on to prepare us better for the future. Even now the government continues to encourage the growth in aviation by supporting airport expansion. 

Our system of government has changed little since the 19^th century and is woefully inadequate to meet the needs of a fast-changing world. We live in a world which is being transformed by technological changes, globalisation and demographic shifts. Companies around the world are learning to restructure themselves to meet consumer demands for local choice and service, whilst gaining the efficiency benefits that technology can bring. The Labour government made a half-hearted attempt to breakdown Whitehall’s outdated silos through so-called “joined-up government”. However the result has been ever more quangos, costly IT failures, bureaucracy, check lists and targets. Whilst the taxpayer’s money is being wasted at unprecedented levels, a highly centralized system of government interferes in our lives more than ever before. Our democracy is increasing stifled and discredited. In 1997, Tony Blair declared that “I want to renew our country's faith in the ability of its government and politics to deliver this new Britain”. In 2010, few have any faith in the government’s ability (and unfortunately politics in general) to deliver anything.

Rather than “save the world”, instead in 2010 we lag the world. As we go forward into the next decade it is only by transforming government, axing huge parts of Whitehall and Brussels bureaucracy, radically cutting the cost of government and restoring freedom to individuals and communities, that we can rebuild our future. We can learn greatly from the successes (and failures) of global companies which have already gone through this transformation. Only by freeing and fostering value-creating industries in manufacturing and the knowledge-based economy, encouraging entrepreneurs and building the skills base companies need, will we rebalance the economy and achieve sustainable growth. We will regain global influence by restoring our economic fortunes, reinventing government, taking decisive action on climate change and preparing more carefully before sending our brave but under-resourced troops to fight foreign wars.

December 2009