Tony Blair's Economic Legacy

In the 1997 election campaign, the Conservatives ran under a slogan "Britain is Booming. Don't Let Labour Blow it". Read original article

• See also Tonys effect on Business

They ran a party political broadcast that looked ahead at economic life under Labour, with various people talking from a future under Labour, telling us how their mortgages had gone up, how they had lost their job and how inflation had soared.

It hasn't happened that way.

The economy has grown at an annual per capita rate of 2.4% a year. This is rather better than the average for the last half century, which is 2.1%.

Our overall growth has been 2.8% a year, (slightly) exceeding the average of the developed world, and ahead of the large European nations by an average annual percentage point.

Meanwhile, inflation has been almost bang on its target. Employment has hit record levels.

If that's all something of a surprise, perhaps more significant is that instead of the government being disrupted by a sterling crisis, Mr Blair is the first Labour prime minister to have endured a currency that is embarrassingly strong, not weak.

Now, it's tempting to dismiss Tony Blair's role in running the macro-economy over the past decade on the obvious grounds that he sub-contracted it all to his Chancellor, Gordon Brown (who in turn out-sourced quite a lot of it to the Bank of England).

And it's true that it is probably not Tony Blair who should be held responsible for big economic decisions, such as making the Bank of England independent, or introducing tax credits.

But aside from the macro-economic management that has not been under the direct control of the prime minister, there have been several important economic developments in the past few years, for which Tony Blair can take a share of responsibility.

He has set an important overall direction for the economy. And it is this direction which is perhaps the biggest surprise of the Labour government of all. For under Messrs Blair and Brown together, Britain has allowed itself to become the most global large economy in the world.

We have allowed our companies to be bought up by foreigners, our manufacturing has been allowed to move off-shore, we have been a more vociferous champion of free trade than our large trading partners. And above all, perhaps the biggest single economic decision of the Blair government's period in office, we have allowed foreign labour to migrate here more freely than most of our counterparts.

The effects may have been deliberate, they may have been accidental; you may view them as positive, you may view them as negative. But the net result is an economy that is rather different to the one Labour inherited.

Business and financial services have become our dominant industries, and manufacturing has shrunk in relative terms far more than anyone could have predicted (from 21% of our economy in 1997, to less than 14% today).

The population has grown by about four per cent - you have to go back a generation to find population growth at that on that scale.

And the foreign cash Britain earns on its investments overseas - at about two per cent of our national income - is higher than it has been at any time since we had an empire.

So it turns out that Mr Blair's natural inclination to project a global role for Britain - obvious in his foreign policy and his promotion of advances in Africa and on climate change - was most forcefully applied to the economy at home.

He didn't get to take Britain into the euro, an international venture to which he was instinctively rather sympathetic, but he did succeed in allowing Britain to cope with a world changing around it.

Perhaps his most important economic legacy is that in a recent international poll, Britain turned out to the the nation most inclined to believe that the emergence of China was beneficial not harmful to its economy.

The UK under Tony Blair has adjusted to the events in the rest of the world with less trauma than most other large countries.