Britain may not have suffered from a 'bust' - but it has not enjoyed a 'boom' either. Yet New Labour welcomes this situation, as it does not involve instability. A closer look at some of New Labour's economic bragging illustrates this point. But it is simple-minded to jump from this fact to the conclusion that the economy is healthy. While high inflation is often a symptom of underlying problems, it does not follow that low inflation is a sign of economic health.
Inflation can also be low because there is little dynamism in the economy.
Tony Blair's recent boast that Britain is experiencing its lowest mortgage rates for decades is essentially just a variation of the point about inflation. The amount borrowers pay for mortgages appears to be low, because inflation is minimal. For instance, if somebody is paying a lender six percent on a mortgage and the inflation rate is two percent, the real rate of interest is four percent. A real interest rate of four percent is not particularly low, but a headline figure of six percent looks low, when compared to the headline figures of 14 or 15 percent in the 1990s. From the perspective of genuine economic strength the economy is far weaker.