Sean O'Grady: Why Mr Brown might thrive in a recession

No one blamed John Major for the last slump, and it even helped him win the 1992 election

Does Gordon Brown have nightmares? Recent financial events will have have provided his subconscious with plenty of raw material to frighten the poor man. So let us, for a moment, peer into Gordon's dreams... The stock market falls by another fifth. A major insurance company has to announce a "rescue" rights issue to prevent it going the way of Equitable Life. A big UK telecoms company goes bust, Enron-style. The flow of funds into pensions collapses, and more workers strike over having their occupational schemes abolished.

Consumer confidence, already a little fragile, weakens. We quit our spending spree. Unemployment edges up. Property values, especially in London and the South-east, stagnate. Negative equity raises its head, panic ensues and the housing market experiences a switchback. Business confidence ratchets down, and the real economy goes into a gruesome cycle of decline. Recession. Cuts in interest rates fail to budge depressed consumers.

The Chancellor has to raise taxes again to fund his plan to save the National Health Service. Public borrowing balloons. For the first time Mr Brown is humiliated at the dispatch box by the shadow Chancellor Michael Howard, who throws the Chancellor's earlier bombast about "an end to boom and bust" back in his face. Iain Duncan Smith at last coins a decent soundbite: "Pensions, homes, investments – all devalued by Labour's triple whammy."

Certainly the stuff of a bad night's sleep. But would such a scenario mean the end of Mr Brown's plan to succeed Tony Blair? Would it be curtains for Mr Blair's ambition to match Margaret Thatcher's record of three general election wins in a row?

Not necessarily. Of course the Chancellor's aides claim that nothing of the sort will happen because of the impressive long-term fiscal strategy they have established, the prudent way in which the public finances have been managed up to now and Mr Brown's own personal credibility. They may be right, although they need to be reminded just how fast an economy can deteriorate and just how that can wreck the public finances.

The Chancellor should be asked to cast his mind back to the early 1990s when he was a rising star on the Labour Party's front bench and enjoyed no end of fun as the Tories' "economic miracle" turned to dust.

Nigel Lawson's surplus of 1988 turned into Norman Lamont's £50bn deficit by 1992. Interest rates peaked at 15 per cent and inflation at 11 per cent, and unemployment reached almost 3 million. The sharpest recession since the war inflicted negative equity on millions of homeowners in Conservative-held marginal seats. John Major's comment on 27 October 1989 that "if policy isn't hurting, it isn't working" summed up the whole miserable episode. And yet no one blamed the Government. Well, comparatively few at any rate. Many polls in 1990-92 asked people who they did hold responsible. Many pinned it on Mrs Thatcher or Mr Lawson (by then gone), the last Labour government (then over a decade past), Brussels or the unions. If the pollsters had offered the choice, people might have plumped for JR or Dirty Den. Most said amorphous "events in the world economy" were to blame.

But the Prime Minister? Oh, no, the electorate seemed to be saying, that nice Mr Major wouldn't do a thing like that. And even if he did, Neil Kinnock would make things even worse. As Mr Major said later: "Oddly, the recession helped us. The electorate believed we could steer through it more effectively than Labour." The 1992 election, held in the middle of a slump, duly saw Mr Major returned. Gordon Brown did not become Secretary of State for Trade and Industry in a Kinnock government.

So if the voters didn't blame the Conservatives for the last slump, they probably won't blame the Labour Party for this one. There is little sense in the coverage so far that what has been going wrong is the fault of ministers. The villains are exotic Americans in cowboy outfits enjoying $100m pension funds, not dour Scottish sons of the manse. Independence for the Bank of England provides an obvious alibi for any ramp of interest rates. The Conservatives don't have a credible alternative. And perhaps the public has become accustomed to "globalisation" – that it doesn't really matter much what governments do, because the forces that affect us are beyond their control.

What voters cannot excuse or forgive their governments for, however, is the sort of one-off incompetence or disaster that can clearly be laid at the door of 10 or 11 Downing Street. Let us recall that Mr Major's luck ran out when the pound was forcibly ejected from the exchange rate mechanism on "Black Wednesday" – 16 September 1992 – five months after the general election. He and his party were clearly responsible. Only then was the die cast for eventual defeat in 1997. The same had happened to Wilson after the 1967 devaluation, Heath after the mishandling of the miners' strike in 1973-4 and Callaghan in the aftermath of the "winter of discontent" in 1978-79.

So, provided that Mr Blair and Mr Brown avoid any set-piece debacle (such as a humiliating defeat in a euro referendum or euro entry followed by a severe slump), they should be able to survive any economic turbulence. No room for complacency, of course, but they can sleep safe in their beds.

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