Andrew Grice: Darling hasn't got the money to be a game-changer

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The Independent Online

It was Gordon Brown who insisted on reviving one of New Labour's favourite tunes in the pre-Budget report: "schools'n'hospitals first." For good measure, he added the police.

Alistair Darling's initial instinct was to apply the squeeze on Whitehall departments more evenly. He knew that protecting the schools, hospitals and the police would impose even greater pressure in other areas, already facing tight budgets after Labour's years of plenty.

Mr Brown prevailed. There is a general election within six months, after all.

Mr Brown and Mr Darling think the Tories, committed to quicker and deeper spending cuts to reduce the deficit in the public finances, risk losing the economic battle on two fronts: putting the recovery at risk and overdoing the gloomy "age of austerity" rhetoric. Mr Darling could have made his pledge to halve the deficit the centrepiece by spelling out more clearly where the cuts would come but instead opted for gain as well as pain.

Darling aides insist he was not creating dividing lines between the two parties, saying: "They are already there, because the Tories oppose support for the economy, keeping people in work and want to cut inheritance tax for the wealthiest people." They say the Chancellor's approach was to "get the economics right, and then do the politics."

The Tories stopped short yesterday of matching Labour on schools and the police. Their priority will be to halt the even bigger rises in national insurance contributions now due to take effect in April 2011. Insiders say there was no great bust-up between Mr Brown and Mr Darling over the one-off tax on bankers' bonuses. Both agreed that something must be done. The conflicting signals from the Treasury in recent days probably reflected a last-minute scramble to make the clampdown as effective and watertight as possible.

Mr Darling initially considered spreading his spending cuts over three years from 2011-12 but decided on the more radical option of two years. All the same, the impact on services outside the three protected species was kept deliberately vague. So the pain, on both tax rises and spending cuts, was deferred and George Osborne, the shadow Chancellor, was right to describe yesterday's package as a "pre-election report".

Yesterday was a holding operation rather than the "game-changer" for which some Labour MPs had hoped. Mr Darling had no money with which to change the game. He could only have done so by being bolder on tax rises or spending cuts. That might have won plaudits in the City of London but would not have won votes next spring.