Andrew Grice: A glimpse of the future as Brown takes a long-term view of battle with Cameron

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"We in Britain now have a long term choice to make," Gordon Brown said in one of the most revealing remarks in his pre-Budget report. It has a triple meaning: whether to give education greater priority than health; whether to put public services before tax cuts; and whether to have an "enabling state" - which runs the risk of being dubbed "big brother".

The Chancellor's statement may have sounded familiar and as dry as dust in parts. There was no long shopping list of what he wants to do when he becomes Prime Minister next year, as the whole Westminster village expects him to. But there were important clues to his long-term strategy and his forthcoming battle with David Cameron.

The Tory leader has got under Labour's skin by turning the NHS from a vote-winner for Labour into an issue on which the Tories can now compete on equal terms.

Labour MPs were hoping for some of the pain to be alleviated yesterday by another big dose of money for the NHS. Instead, Mr Brown ignored health and pre-empted next year's Government-wide spending review by making education Labour's "number one priority". His 4 per cent real-terms increase for the school buildings budget will be followed by a similar rise in day-to-day education spending. The NHS will probably get something similar, but it will feel like a cut because its budget has been growing at 8 per cent.

Why is the Chancellor apparently putting schools before hospitals at a time when the Government is on the back foot on health? The answer is that he is putting his long-term strategy ahead of short-term tactics. He is convinced that to survive as a major economy by meeting the challenge of globalisation, Britain must take urgent action to equip its workforce with the necessary education and skills.

In other words, the very prosperity of the country could depend on making our schools the best in the world. It is not, he judges, going to depend on building a few more hospitals or preventing painful closures.

At one level, Mr Brown's "choice" looks risky. If the Tories continue to make hay with the issue, they might dilute one of Labour's biggest electoral assets. However, its potency may be on the wane anyway. Although many people speak favourably about their own experience of using the NHS, there is a "perception gap" in which many voters think the service as a whole is in a sickly state.

The Chancellor, too, may be losing patience with the inability of money alone to cure the NHS's ills. Spending has doubled and yet Labour has received no political payback. "Schools and hospitals" has been a familiar Labour mantra at general elections, but the two issues may no longer be so joined at the hip.

Mr Brown is focused on the bigger picture. If Britain can't compete in the global economy, then it won't have the money to spend on the NHS. He is giving priority to what he called "the essential investments" recommended by a raft of independent inquiries he has set up on issues such as transport, the environment and skills.

He no doubt hopes that the Tories' ability to exploit health will be limited by the second "choice" he outlined yesterday: Labour investment versus Tory tax cuts. It is Mr Brown's favourite dividing line and it has been the most important issue at the last three elections.

Mr Cameron is trying to prevent a re-run by playing down the Tories' traditional commitment to tax cuts. But Mr Brown thinks he has found a chink in his rival's armoury: the Tories would "share the proceeds of growth" between investment in public services and tax cuts. In Mr Brown's eyes, that means the party is still committed to tax cuts and so his dividing line is valid. By highlighting this "choice" yesterday, Mr Brown makes it less likely that his Government will announce a headline-grabbing tax cut before the next election.

He has done this before, by reducing the basic rate of income tax from 23p to 22p in the pound, and some expect him to repeat the trick. But that would make it difficult to play the "investment" card, and risk a Dutch auction on tax cuts which the Tories might win.

The third "choice" which became clear yesterday is about the role of the state. Mr Cameron cleverly distances himself from Thatcher by saying there is such a thing as society, but also parts company with Mr Brown by saying it is not the same as the state. The Tories will portray the next Prime Minister as a "big state" man who wants to impose top-down solutions. It could prove an effective line of attack.

Mr Brown believes an "enabling state" is needed to meet global challenges, since "society" will not do so by itself. "The investments that Britain must make can only be achieved in a new era of shared responsibility and partnership between private and public sectors," he argued yesterday. His allies highlighted his plan for new homes to be carbon free as a good example of this partnership, and of Brown substance outgunning Cameron: while the Tory leader talks about putting wind turbines on people's roofs, the Chancellor does a deal for all new homes to be carbon neutral.

Other contrasts between the next election's two central figures are emerging. Their styles are very different. The Iron Chancellor with the "big clunking fist" prefers hard politics. Mr Cameron hopes that people will a ready for a softer approach. He offers sunshine and smiles in a deliberate contrast to the dour Mr Brown. He argues that "General Well Being" (GWB) is just as important as Gross Domestic Product (GDP) and believes that teenage louts need love as well as punishment. Yesterday's glimpse of Mr Brown's long-term strategy suggests that he holds the advantage over Mr Cameron on policy.

But the election will also turn on the personal appeal of the two would-be Prime Ministers, which should not be underestimated. We will not know how they measure up against each other until battle commences next year.

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