Another Budget for Gordon Brown - but has he been in the job for too long?

This term has been flawed by poor discipline over public spending and excessive tinkering on tax
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The Independent Online

The longer Gordon Brown is in the job, the greater the argument for term limits. Today will be his eighth Budget, making him the longest-serving Chancellor, alongside David Lloyd George. He was already the longest-serving finance minister among the Group of Seven developed countries: being in charge of a nation's finances is not normally a job that ministers in democracies do for very long.

The longer Gordon Brown is in the job, the greater the argument for term limits. Today will be his eighth Budget, making him the longest-serving Chancellor, alongside David Lloyd George. He was already the longest-serving finance minister among the Group of Seven developed countries: being in charge of a nation's finances is not normally a job that ministers in democracies do for very long.

And with reason. There is not just the practical, if unfair, reality that voters get tired of politicians that go on and on. There is also the equally practical reality that senior politicians become ground down by office and start to lose their judgement or their health. Arguably that is what has happened to the Prime Minister.

But the Chancellor shows no sign of such exhaustion. It is us who are becoming tired of him, not him with us. There is a general perception that Mr Brown had his best ideas in his first term of office. They delivered macro-economic stability and that was a huge prize. In large measure he - and the Bank of England - have continued to deliver that stability, though at the cost of a surge in borrowing, public and private. But his second term has been flawed by poor discipline over public spending, concealment of the implications of that spending for taxation, and excessive tinkering on both the tax and spending sides of the account.

So now he has yet another shot. Of course, much of the task of any Chancellor is an ongoing one. There are always going to be new demands on the public purse - from the war in Iraq or mad cow disease for example. There are always going to be swings in revenue: unexpected gains from things such as the auction of new mobile phone licences and unexpected shortfalls such as the present weakness of income taxes. Responding to those swings is an essential part of the job.

But this Chancellor has tried to do much more. On the spending side there has been much tighter top-down control than in the past - or more accurately there has been an attempt at tighter control, which seems to have failed.

To generalise, the Treasury gives very specific priorities to the public sector, which the spending departments have learnt to meet by dressing up spending in such a form that the Treasury has to accept. Because the Treasury has tried to exert too precise a control over the additional resources it has distributed, it ends up with much greater inefficiencies.

In the few areas where there has been greater autonomy in spending - in schools for example - the money has probably been better used. But the broad mass of the public sector has become adept at dreaming up additional projects that will get it money instead of trying to do its basic job more efficiently.

Similar inefficiency is evident on the tax side. Most people feel there has been a big increase in taxation. Well, so far, actually there hasn't. Net tax and social security contributions were 36 per cent of GDP in the 1997 fiscal year. In the present fiscal year they are estimated to be 35.9 per cent. If you take 1996 and the projections for 2004 then there has been some increase and the tax burden is projected to rise further through to 2008. But there has not been the huge increase that people seem to feel has happened.

What's up? Colbert, Louis XIV's famous finance minister is credited with the statement that the art of taxation was to extract as many feathers from the goose as possible with the minimum amount of hissing. Gordon Brown seems to have done the opposite. And that is the fault of his determination to fiddle.

So we have had visible increases in taxation on things such as air travel - the tax on a flight to Scotland is often more than the cost of the fare - petrol and National Insurance. And then there have been cuts in taxation, such as strings of allowances for people who can qualify under some pet Treasury scheme, and the zero corporation tax band for small businesses.

In short, he has made taxation more intrusive without getting in much more money. By complicating the tax system he has also created new loopholes - which benefit the richest, most sophisticated and most mobile people. If he does some loophole-closing today, and that seems inevitable, note that he himsellf created these loopholes in the first place. It will be the job of his successor, from whatever party, to set to work both to simplify the tax system and simplify the way the Treasury controls the rest of Whitehall.

His successor will have a further problem: coping with the surge in borrowing. We will get an early sign of the strain on public finances today, for it is clear from the leaks that some departments will have their budgets squeezed. It looks as though defence will be particularly hard hit; indeed the word is that everything bar health will find growth of spending curbed.

In other words, this Chancellor will have to make a start on a change of direction that his successor will have to follow. It seems strange, doesn't it, to be already writing about a politician still at the height of his powers, in terms of his legacy? But the practical reality, irrespective of whether this is his last or his second-last Budget, is that he is through at least 80 per cent of his term of office.

He will come up with all sorts of new initiatives, such as the merging of the Inland Revenue and Customs and Excise, but the question raised by all of these is: if this is so important, why didn't you think of it earlier? There is no answer to that.

So what is the outlook for the UK economy, the test that will shape Gordon Brown's future reputation? Well, we have growth, very good growth by European standards, if not by American or Asian ones.

If an economy grows strongly it can get away with mistakes that hobble stagnant economies. The global outlook for growth this year is better than for last year and the UK ought to be able to benefit from this. There is no looming economic catastrophe, or at least no obvious one.

But there are dangers. One warning sign is the widening current account deficit, which suggests some strain. Another longer-term problem is the build-up of debt, both personal and public.

Interest rates may remain low but, in a world of stable prices, debts have to be to paid off in real money, not the inflated stuff to which we have become accustomed. There is the obvious question as to how the house price boom will end - with a period of stability or with some fall in prices? - and the consequences of that.

Chancellors have to work with what they have got. This one was tremendously fortunate in being dealt the best hand of cards in Europe: a nimble economy, with strength in growth sectors, and with relatively sound public finances.

But, as he would say, there is more to be done. Someone has to simplify the tax system, get better value for money out of public spending and make progress in helping people pay off debt and save enough for their retirement. It needs someone else to do it. And that is why term limits are such a good idea.

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