Steve Richards: Gordon Brown's major worry should be that this non-story has run with such ferocity

Until recently, some extreme Blairites and the Conservatives condemned Gordon Brown for being too cautious, a weak figure standing in the way of their own crusading boldness. Now, without pausing for breath, they attack from the opposite direction, inserting their knives on the grounds that Brown is too bold, a Stalinist in his ruthless determination to implement policy.

It is in the context of apparent Stalinist recklessness that Brown's first Budget is attracting far more attention than his tenth, unveiled last month. Brown stands accused of ignoring advice from Treasury officials in May 1997. The Chancellor was warned there were risks in imposing a tax increase on dividends to pension funds.

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This is the essence of the story that is erupting over Brown, fuelling further breathless speculation that he will face a challenge for the leadership and provoking front-page headlines in some newspapers about a pensions scandal.

For some time, British politics has resembled a wild Alice in Wonderland, in which nothing is what it seems, but this one takes the breath away. The current row is over nothing in the sense that nothing of significance has surfaced in recent days. In the 1997 Budget, Brown scrapped the tax credits on payments of dividends to pension funds. This was known at the time and caused a fuss in the immediate aftermath.

Indeed, of all the tax increases, it was this particular manoeuvre that gave rise to Brown's contradictory reputation of being famous for putting up taxes stealthily. As the former Tory Chancellor Ken Clarke confirmed on the BBC yesterday, he raised his concerns immediately afterwards as did his party's leadership.

The media did not take much notice, nor did the voters, because the government was starting out on its insanely long golden honeymoon, the opposite of what is happening now. Then it could do no wrong. Now it can do no right. Even retrospectively, it can do no right when part of the media looks back at the period when it was supposedly doing no wrong.

Ten years after the Budget, the Treasury advice has been published. Unsurprisingly, the officials warned of worse case scenarios if Brown went ahead with his plans. It would have been a news story if they had not provided such information. Their advice has been published under the Freedom of Information Act and is being treated as political dynamite in the media and by political opponents. Sadly, such hyperbole provides ammunition for those that argue against a Freedom of Information Act. Perhaps Britain's political culture cannot cope with the excitement of it all, the release of documents, plucked out of context and treated like the lighting of a touch paper.

What was the context a decade ago? After 18 years of Conservative rule, Labour had been elected with high expectations that it would address Britain's crumbling infrastructure. Yet Brown could not raise cash by putting up income tax. The mad culture of the times made increases on earnings, however vast, politically impossible. The Treasury argued then and now that the changes to pension funds were part of a wider reform package that included cuts in corporation tax. The more obvious reality was that Brown needed to raise revenue. He looked around and came upon this particular scheme.

There are risks in any tax increase. If he had decided to look elsewhere, the Treasury officials would have written long documents about the potential downsides of other tax rises. In this case, the officials' advice was characteristically balanced. Some of them pointed out that any losses would be mitigated by the buoyant state of the stock market, which meant that many pension funds were enjoying surpluses in 1997. Others warned of negative consequences, but in a rosy context in which pension funds were booming. I stress again they would have dutifully warned of possible risks if Brown had contemplated putting up other taxes instead. That is their job. There were no easy revenue-raising options. There never are, especially given that income tax rises on high earners, the most straightforward and fairest option, is ruled out.

Brown went ahead in spite of the warnings from some officials. Does that make him Stalin or admirably bold? Unlike many ministerial pygmies who were in awe of their officials, terrified into paralysis, Brown would take them on. This was especially the case in the early years. The alternative in May 1997 would have been to do nothing in relation to revenue raising. This would have been more typical of the Labour government in its timid opening phase: "Help! We can't do this, look at what the officials say might happen!" This cautious mood was prevalent across Whitehall when Labour came to power and was more damaging than the occasional Stalinist challenge to Whitehall orthodoxy, although it is not even clear that Brown was making such a reckless challenge. The Treasury officials do not come down on one side or the other in relation to the tax rise.

When the Stalin attack runs out of steam, opponents move on to the other great cliché of our time, that Brown was "spinning" in his 1997 Budget. You bet he was spinning, but recall for a moment what the political mood was like in 1997. Tax was still the great taboo. Everyone from the CBI to virtually every voter in the land wanted higher public spending, but was also against tax rises.

As far as the economy was concerned, Labour was on probation. There could be no echo of the 1970s when taxes soared under Labour. In the early years of power, Brown's political genius was to square the circle. He addressed the contradiction in British political culture by putting up taxes that would not cause an immediate outcry. If he had advertised more explicitly what he was doing in 1997, all hell would have broken loose.

He could, and should, have been more open about the thinking behind his most recent Budget. There are different points to prove after a decade in power. But in May 1997 there was no political space for candour over tax rises. Good for him that he still managed to raise a bit of cash without the roof falling in.

Brown and Labour's worry should have nothing to do with the substance of this non- story. They should be concerned that it runs with such ferocity, partly because the Treasury's initial reaction was to claim ridiculously that virtually everyone from the Pope to Bob Dylan was in favour of what they were doing in May 1997. The Brownite entourage panics counterproductively because much of the media is turning against Brown and is giving the two Davids, Cameron and Miliband, the benefit of every doubt.

Is the mighty media's hostility to Brown a permanent feature of British politics? If it is, he cannot win the next election. That is the only question prompted by the furore over a total non-story.

s.richards@independent.co.uk

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