Western Europe
Western Europe Great Britain National Affairs A STRANGE DICHOTOMY marked the year. While the country enjoyed continued prosperity and stability, the government—especially Prime Minister Tony Blair—incurred increasing unpopularity, albeit not to a degree that would threaten Labour's continuance in office. The sustained growth of the economy and low interest rates softened the impact of tax increases on disposable income, although opinion polls did register discontent, particularly over local taxation. Chancellor of the Exchequer Gordon Brown's pre-budget report in December indicated that receipts were lower than anticipated while costs associated with the Iraq war had pushed spending above expectations. Nevertheless, Brown adhered to his "golden rule" that over the economic cycle the government should borrow only to invest. Employment reached a record high of 28.1 million, and the number of people applying for unemployment benefits dropped steadily, reaching 917,800 in November, 7,900 lower than a year before. High employment raised the threat of wage inflation. The burden of interest payments on the growing public debt raised similar concerns. In July, interest rates were cut a quarter-percent to 3.50 percent to stim- ulate the economy, but in December this was reversed for the first time in almost four years; rates went back up to 3.75 percent so as to coun- teract the danger of rises in house prices and personal debt. Politically, satisfaction with the government continued to decline from its peak of about 55 percent just after 9/11 to about 25 percent in De- cember 2003. The results of local elections held in May registered the po- litical fallout: Labour lost a combined 800 seats, and the Conservatives, winning the largest share of the vote, gained about 500.
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