Alan Watkins: The Chancellor will drive us all to drink

The UK has the second largest proportion of poor children after America. The Government's solution is radical, to say the least
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The Independent Online

Some years ago, I tried to work out the best value in a bottle of wine. It is now around the £10 mark. Most people are uninterested in how the calculation is performed, but I shall go on, while trying to avoid the maths. The price of a bottle of wine (or of anything else attracting tax) is composed of two elements: fixed costs, of which the revenue now takes £1.47, and initial costs, which depends on a number of factors, including age, fashionability and intrinsic merit. We define value as the ratio between initial cost and final cost.

It follows that an expensive wine has a high value, while the price of a cheap wine is taken up by tax and other costs. VAT, which is a proportionate tax, does not affect these calculations. But the strange thing is this. If value, as we have defined it, is plotted on a graph – value on the vertical axis, price on the horizontal – the line is not straight but bent. It rises steeply to begin with and then there is a point at which it flattens out, straightening only slowly.

I am not saying that a bottle of Chilean cabernet, for example, fails to be good value for money: it is. And when I put my calculations to an old friend, Sir Samuel Brittan (the great economist), he advised: "Buy the most expensive wine you can afford."

This I propose to do, to help both myself and Mr Alistair Darling's campaign against child poverty. About this, however, I would make several observations. The assignation of specific taxes to separate objects – "hypothecation", as the Treasury used to call it – has always been unpopular with the Treasury and is usually the victim of cheating by the Government.

The road fund licence is the example usually cited, but the entire system of National Insurance is the great scandal of the last century, as it remains for the present age.

What Mr Darling seems to have said is that excise duty (on spirits rather than on wine) is to go to children. I do not see how this can be made to work. In any case, it is not children who are poor but their parents, or the local authorities responsible for their care.

Among European countries and the USA, the UK has the second largest proportion of poor children, after America. This is defined as something over 15 per cent of children with an "equivalent income" of less than half the median. The source is Unicef. For all the boasting from Mr Tony Blair and Mr Gordon Brown and the optimistic forecasts of Mr Darling – obediently echoed by the Government's remaining supporters in the press – it does not seem a very impressive achievement.

Mr Brown, as Chancellor, used to intone "boom and bust" to annoy the Tories, where he usually succeeded, and the poor boobies behind him used to cheer their heads off. There was an earlier phrase, less apocalyptic but carrying much the same meaning: "Stop-go." I remember well those Tory chancellors from the old days: Reginald Maudling, Selwyn Lloyd, Derick Heathcoat-Amory.

Now there was a name to be conjured with, tossed up and lost under the sofa: Heathcoat-Amory. His hobby was Boy Scouting, in the nicest possible way, and he could have bored in the Olympics. By contrast, Alistair Darling is a scintillating presence. But Mr Darling, like his Tory predecessors of old, now says: stop.

Another Tory chancellor who was never given the opportunity to say "stop" was Iain Macleod. That was because he held office for just over a month with his sudden death in 1970. One of his sayings was that a Budget which received glowing notices looked less impressive six months afterwards; after the same period, a flat Budget could look quite sensible, after all.

Mr Brown used to like to do something eye-catching at the end of his speech. In addition, he would insert some fiendishly complicated proposal somewhere in the middle.

The accountants who worked for the prosperous classes would then devote months to frustrating the Treasury's intentions if, indeed, any consistent intentions could be discerned, after all. Mr Darling may have inserted various explosive devices into his text, waiting to be detonated at some later stage, but the limit of his ingenuity seems to be to want to impose a tax on plastic bags, or rather, to do away with them entirely. The whole business awaits "consultation", no doubt endless meetings between representatives of the supermarkets and of the Government.

Not so long ago, on a visit to Marks & Spencer, I would be charged 15p (I can remember the exact amount) for a plastic bag. Shortly afterwards, shops' habits became unpredictable, slovenly or both. Charges for bags would vary from group to group, shop to shop or even shop assistant to shop assistant. Eventually, the trade settled down to universal free distribution of plastic bags, as would be recommended by postwar revisionist socialists such as Anthony Crosland; or perhaps not.

It is Crosland who remains the lost chancellor of postwar Labour history. The other lost Labour politician of that era is Denis Healey. He should have been Foreign Secretary; in both cases, they were victims of the internal party calculations of successive prime ministers, Harold Wilson and James Callaghan, though Crosland would have had only just under a year to live if Callaghan had appointed him Foreign Secretary in 1976. Callaghan used to say afterwards that, in his state of health, the job would have proved to be too much for him at the Treasury. But then, he would have died of a stroke, at 58, in any event. Crosland had his own favourite for the chancellorship. This was Edmund Dell, who was a little-known figure even in his own day and is now completely forgotten, except by his own family and a few peripheral figures who are interested in political history. He became Secretary for Trade in the Callaghan government.

Where (you may well ask) is all this leading us? After his retirement, he wrote a long book on Labour governments. He did not take a very favourable view of his former colleagues or of Labour governments generally. He also wrote an equally long book on Chancellors of the Exchequer. The highest marks of all went to Sir Geoffrey Howe. He had brought spending under control and inaugurated Margaret Thatcher's revolution.

The unemployed did not appreciate Mrs Thatcher or Sir Geoffrey at the time. But the voters still managed to give the Conservatives a thumping majority. The outstanding feature of Tory propaganda of those years was that unemployment was not the Government's fault but had been brought about by "world conditions". According to the polls at the time, the voters agreed with the Government and voted accordingly.

Mr Brown's government is trying the same kind of wheeze. But that earlier Conservative administration had been in office for only a few years. The present lot have been around for a decade. It makes a difference. In the meantime I am, to help the Chancellor, investigating the best value in wine.