As we have stated on many occasions in the past "bountiful Brown" has, like Houdini, somehow escaped reasonably unscathed; like President Ronald Reagan (Teflon Man), nothing seems to stick on him.

Thus far Gordon Brown has been remarkably successful in predicting economic growth within the UK economy and, after 8 years, we have to recognise that a reasonable success of the UK economy can be put down to his stewardship.

However, he has clearly been very unsuccessful in predicting tax receipts, and as a consequence the Budget deficit is deteriorating, albeit that he is quite correct to state that UK, by comparison with almost all industrialised nations, is in far better economic shape, with significantly lower quantities being spent on financing debt, and therefore greater funds available for public services.

Unfortunately, it is also becoming clear that having thrown huge amounts of money at public services they have not improved in productivity nor efficiency, and they are not delivering the sorts of dynamic improvement that one would have expected after 8 years.

It is widely recognised within government and public services that management tends to be focused upwards. In other words, wherever you are in the chain, you manage the person or process above you for your personal benefit. Whereas in private commerce and industry you manage the issue with you and below you, because delivering results generates reward and promotion. In other words, there is no profit in being the best nurse, teacher, policeman, unless your superiors recognise your contribution; whereas in industry and commerce it does not matter how wonderful you are, if you produce a negative bottom line the ultimate result has inevitably to be failure.

Despite the above, what goes round, comes round, and we have a suspicion that Gordon Brown might be proved right yet again, and ironically his tax revenues may improve, such that the budget deficit will decline. In a year's time the financial position may look significantly more attractive. UK Plc at a corporate level is trading remarkably well. We believe there are significant profits being ploughed back into the system via corporate tax and other business levies, and which will also be distributed by companies through share buy-backs, dividend payments and increased revenue streams. Gordon Brown will definitely benefit from continued increases in oil prices which we predict may easily average $70 a barrel by the end of this year.

The fact that the UK continues to be an easier place to do business with, with better levels of corporate governance, and a possibly lower revenue charge on local and international companies will continue to attract inward investment. A vast amount of the reward in our large multi-national companies derives from their enormous developments and growth in emerging market economies, and we are better placed than many countries around the world to gain from the evolution of an extraordinary economic dynamic that is evolving.

I am not convinced therefore that another Labour government will actually dramatically change taxation, because if the economy does grow and oil revenues by example are received, there should be enough income to meet the spending plans.

In our opinion it also really does not matter in the short term who wins the next election, as not one of the political parties is going to change an economic model which is working remarkably well, and whilst there may be some tinkering at the periphery, the real issues for us all are:

1) Environmental change
2) Social dislocation through terrorism
3) Migration and the desperate need to get past the xenophobic argument, particularly in this country
4) The demographic age-wave

Finally, we leave you with the observation often made, that a conservative is a liberal who has been mugged, and in some way it may apply to us all!

Post Budget Observations - Winter 2005