Eleven goes into 10 with a bit left over

Gordon Brown's 10th Budget, on Wednesday, is likely to be a distinctly prime-ministerial affair, ranging far beyond the dry questions of tax rates and spending limits. With many observers speculating that this could be the final Budget day before the Chancellor moves to Number 10, analysts are already totting up the legacy of his long stint at the Treasury, and asking what sort of place Brown's Britain has become.

Since the Leader of the Opposition traditionally responds to the Budget speech, Brown will also get his first chance to spar directly with fresh-faced David Cameron across the floor of the House.

There is much for him to taunt the Conservatives with. On many of the economist's favourite measures - GDP growth, interest rates, unemployment - Britain has performed exceptionally well in the last nine years, even after a sharp slowdown in 2005.

'He has been both successful and lucky,' says Roger Bootle, economic adviser to Deloitte & Touche. 'I would put on his scorecard very favourable marks for economic stability.'

And Brown won plaudits across the political spectrum for his bold decision, immediately after arriving in Downing Street, to tie his own hands by giving the Bank of England the power to set interest rates. That decision, it is now widely agreed, contributed to the steady-as-she-goes economy the country has experienced since Labour came to power. When growth slowed sharply last year as the housing-market bubble began to collapse, a touch on the accelerator - an interest rate cut by the Bank - put things back on an even keel.

Having been relieved of this key policy job, the Treasury was set free to concentrate on controlling the purse-strings, and intervening - or meddling, as Brown's critics see it - in the micro-economy: the day-to-day life of Britain's businesses.

Those purse-strings were eye-wateringly tight in Labour's first two years in office, as the Chancellor stuck to tough Tory spending plans (to the fury of left-wing backbenchers) while he worked to establish his reputation as 'prudent' - then his favourite word.

But much of Labour's time in office will be remembered for delivering a sustained increase in resources to the public services, in particular the health service and education - even when that meant raising taxes. In the 2002 Budget, Brown bumped up National Insurance contribution rates by 1 per cent, to pay for an increase in funding of 7.4 per cent a year in real terms for the following five years.

Brown and his advisers believed they had carefully built up a consensus for the move, using the independent Wanless report on the future of the health service to support the need for a sharp increase in resources. But business reacted furiously to the unexpected increase in employers' NI contributions.

Whether the surge in spending on both health and education has delivered the 'world-class public services' Labour promised is not yet clear. 'The problem they face is that the public's expectations are always way ahead of where government has got to,' says Nick Pearce, director of the Institute for Public Policy Research.

Spending all that extra cash may not have satisfied frustrated consumers of public services, but neither has it led to a fiscal crisis, despite dire warnings from many observers. The Treasury has so far managed skilfully to paper over its 'black hole', with a bit of help from the £2bn windfall tax on oil companies that will come into effect next month and bumper profits in the financial services sector.

However, businesses say the substantial increase in the proportion of GDP swallowed up by public spending, and taxation, since 1997 is beginning to take its toll on the economy.

Brown came to power determined to fix some of the deep-seated problems in British industry: underinvestment, poor management, the short-termism of City investors, low skill levels, and a host of other familiar woes.

Most of all, he wanted to tackle the flagging productivity that results from this long list of structural problems. Closing Britain's productivity gap with its major competitors - the US, France and Germany - was written into the Treasury's remit.

But observers say it is this central promise that will stand out as the most spectacular failure of Brown's tenure at Number 11. Britain has caught up with Germany, but productivity still lags behind France, the US, and the average of the other G7 countries. Productivity growth slumped to zero last year.

'He set out his stall on productivity,' says Bootle. 'There has been a whole raft of micro-measures, but businesses complain about instability and there's absolutely no sign that it's improved our productivity growth.'

That matters not just because it shows the Treasury has failed at the biggest task it set itself, but because weak productivity and low business investment could be damaging Britain's economic future.

'On productivity, he has failed, and I would be very worried about that,' says Ruth Lea of the Centre for Policy Studies. 'That is economically the most serious problem: he's undermining the ability of the economy to grow.'

Many analysts believe this lacklustre performance is connected to another structural problem. Britain's businesses have been worryingly unwilling to invest, despite strong profits and the stable environment Brown boasts about.

Perhaps because of pension deficits bearing down on balance sheets, or perhaps as a response to the aftermath of the dotcom boom, when billions of dollars of investment went up in smoke, firms are hoarding cash instead of investing it in the future. Whatever firms' reason for caution, economists fear that Britain's capacity for growth could be permanently damaged.

And as the CBI's furious attack on levels of business taxation showed last week, many in the corporate world blame Brown for making their lives harder. The CBI argues that rising public spending has 'crowded out' business investment; and accountants say their clients are increasingly angry about HM Revenue & Customs' aggressive approach to tax avoiders.

George Osborne, the shadow chancellor, hopes to build these complaints about high taxation and stifling regulation into a coherent case against the Chancellor, whom he accuses of failing to equip the economy for the 21st century: 'Britain's ability to compete in the global economy is being steadily eroded,' he says. 'It's regulation, lack of proper transport infrastructure, low business investment and also the state of the public finances that's driving the high levels of taxation.'

He is also just as cynical about Brown's recent conversion to popular causes such as the environment as the Chancellor himself has been about Cameron's brand of 'compassionate conservatism'. 'Suddenly he wants to be seen as Mr Green; suddenly he wants to engage young voters; suddenly he's trying to appeal to women voters,' Osborne says. 'This will be a Budget for Brown, not a Budget for Britain.'

Vince Cable, the Liberal Democrats' Treasury spokesman, applauds Brown's performance in delivering economic stability, but criticises his enthusiasm for rolling Number 11's tanks onto other ministers' lawns, and questions his lieutenants' understanding of the corporate world.

'You get this picture of a Treasury with more and more power, but without the competence,' he says. 'You're getting a structural failure. It's not so obvious as a Black Wednesday, but it's a cumulative mess. What it tells us is that his instincts are to centralise decision-making.

'There is a complete lack of understanding of the way that markets actually work. It's striking, for example, that none of the Treasury ministers have any experience in a business context.'

Nine years after Brown arrived at the Treasury, there is some evidence that the public are beginning to agree. The Tories point to evidence from pollsters YouGov showing the narrowing gap between Labour and the Tories when voters are asked 'who do you trust to manage the economy?' It is now 4 points compared to 22 less than a year ago, before the election. Whether because of slowing house price growth, rising unemployment or the constant complaints of business, the perception that Britain's economy is safe in Brown's hands seems to be slipping. He might well conclude it is time for a change of job.