Britain's robust economy under Gordon Brown's Chancellorship has enabled Labour to rid itself of a sorry record for mismanagement and win a level of public support never previously enjoyed by a Labour administration. Colin Tapping looks at the challenges that still lie ahead

GORDON Brown arrived at the Treasury five years ago with more baggage than just the famous red box handed down to Chancellors of the Exchequer since Gladstone's day.

He arrived saddled with the reputation for economic mismanagement which had sullied Labour since its first government seven decades earlier.

A landslide victory at the polls on May 1, 1997, did not mitigate the need to shake off that damaging image.

There had, after all, been previous false dawns for the Labour Party under Clement Attlee and Harold Wilson. The devaluations of 1947 and 1967, and the IMF crisis of 1976, soon reversed electoral fortunes and were precursors to defeat at the polls.

While scandal and sleaze may have brought down Conservative governments, Gordon Brown knew full well it was the handling of the economy which had sounded the death knell for all previous Labour administrations.

Labour was only entrusted with office and overwhelming public support in 1997 with a strict guarantee which reflected the party's inglorious past. That guarantee was an unequivocal promise to ditch Labour's traditional "tax and spend" reputation. The manifesto commitments not to raise taxation and to stick to Conservative spending plans for two years were solemn and non-negotiable.

And, within five days in office, Labour added to the economic shackles on itself by handing over control of interest rates, and with it guardianship of a 2.5 per cent inflation target, to the Monetary Policy Committee of the Bank of England. Ambition, in the short-term, was sacrificed to gain credibility in the long-term.

If the new Chancellor was suffering pain and frustration from not having his own agenda and feeling pressure for radical reform from his own ranks, it did not show.

Indeed, he seemed to revel in Labour's new image as a friend of business, a friend of the City. He actively cultivated his image as the "Iron Chancellor" to demonstrate his adherence to a predetermined course. Prudence became his catchphrase.

Any signs of the diehard socialist many of his critics suspected Gordon Brown of being were ceremonial.

He refused to conform to the white tie and tails dress code when making his Mansion House speech in the City of London.

And the battered Budget red box, used by every Chancellor since the 1860s, was left behind and replaced by one made by a group of apprentices in his Scottish constituency.

But in his first Budget, in July 1997, there was also the first indication of old-fashion-ed redistribution of wealth, with a £5bn windfall tax on privatised utilities to subsid-ise the New Deal programme aimed at promoting job opportunities for young people.

But his overriding aim was to reassure the voters, business, the City and the rest of the world that the British economy was in safe hands.

Up until now, at least, he has achieved that goal.

Almost without question, he is the most successful Chancellor since the war; arguably, one of the most successful in history.

There have been five years of economic growth; inflation consistently under the 2.5 per cent target; mortgage rates the lowest for 40 years; and unemployment the lowest for a generation.

And, as if to pour scorn on Labour's profligate image, he has actually reduced the National Debt, paying back more last year alone than all previous 50 years put together.

Britain has the most robust economy of the western world, uniquely avoiding the recession endured elsewhere caused by the combination of a US downturn and the terrorist atrocities of September 11.

Mr Brown's legacy as Chancellor has been to convert those who did not believe Labour could be trusted to run the economy.

In doing so, he played a fundamental role in helping Labour secure its historic second term of office.

Having won that respect, Mr Brown's task now is to convince the country that Labour can deliver stable economic growth at the same time as investing in public services.

If he is successful, Labour will be on course for a third term and, who knows, Mr Brown on course to be Prime Minister.

That he felt able to announce a blatant "tax and spend" Budget last month demonstrates how confident Labour has become in its economic management skills.

That opposition to the Budget has been relatively lukewarm demonstrates how confident the country has become in its Chancellor.

Sceptics suggest Mr Brown has abandoned prudence in a desperate attempt to prop up the NHS, the likely battleground at the next election.

Much hinges on the future economic growth needed to finance investment.

The Chancellor's forecast of between two and 2.5 per cent this year is already being questioned, suggesting there may be a black hole in his future spending plans.

But such is the stature of the Chancellor, this Labour Chancellor, that he is being given the benefit of the doubt, with the Financial Times concluding: "History suggests, however, that it is unwise to be too dismissive of the Chancellor's forecasting skills."

It is unwise, also, to be too dismissive of the Chancellor's ability to continue to deliver a strong economy on which the future of New Labour depends.