Gordon Brown has left the Conservatives struggling to make their sums add up

The Chancellor's performance was that of a veteran rock star, deciding that his old hits would go down best
Click to follow
The Independent Online

Gordon Brown has returned to some of his early themes. The aim of yesterday's Budget was almost precisely the same as his debut performance soon after Labour's first election win in 1997. All those years ago Mr Brown sought to prove that he could be trusted to run a stable economy and improve public services. With the Conservatives and some in the media currently accusing him of recklessness, taxing and spending like the oldest of old Labour villains, the Chancellor is highlighting once more his relationship with prudence.

His performance was the equivalent of a veteran rock star deciding that his old hits would go down best. They were all there, an album of prudence-related themes that dated back to his more youthful years. Mr Brown resolved to "lock in stability", keep to his "fiscal rules", and be eternally "vigilant to the economic cycle". As a bonus, he promised to proceed only from "sound fundamentals", a phrase that managed to sound simultaneously reassuring and painful. For a rousing encore, he reminded us that there had not been, and there would not be in the future, a return to "boom and bust". This was a phrase that had been quietly dropped in recent years in case Britain did indeed go fleetingly bust. It is a sign of the Chancellor's confidence that he felt able to revive those golden words now.

The old hits have a familiar air, but the context in which they were delivered yesterday would have been unrecognisable in the early years. In 1997 the Chancellor was on trial. I doubt if even he knew for sure whether his persistent prudence would produce the stable and sustained growth that has financed much of the investment in the public services. I am certain he and Tony Blair were deeply nervous when they put up taxes to pay for improvements in the NHS. A very senior figure in Downing Street told me at the time he feared that the measure alone could lose the next election. As it turned out, the prudence paid off and even the tax rises were popular, according to polls taken subsequently.

Now it is a confident chancellor who is putting others on trial. Early in the Budget he announced he would be publishing proposals for reform of the eurozone's stability and growth pact. He wants the pact brought more closely into line with his own fiscal rules. The poor old eurozone, he implied, had much to learn from Britain's sustained and relatively high growth rate.

He suggested, in what was one of the most overtly political budgets for decades, that the Conservative Party had even more to learn. A substantial section of the speech was aimed at establishing a dividing line with Michael Howard's party. The Chancellor pledged that he would increase spending in real terms on the police, security services, the armed forces and higher education. In all these policy areas the Conservatives have implied that they would freeze the level of spending.

Mr Brown argued this would be "irresponsible", a term that used to be applied with deadly effect to Labour's spending plans. After 18 months in which the Chancellor fumed at the Prime Minister's tendency to take on the Labour party rather than the main opposition, he used his Budget to open the next general election campaign.

The dividing lines between the parties are not greatly different to those that dominated the last campaign in 2001. Labour will pledge more investment in public services while repeating its pledge not to raise income tax. Mr Blair and Mr Brown will argue their commitments can be met without tax rises through a combination of growth and cutting waste.

The Conservatives will claim that under Labour taxes will soar in a third term. As Mr Howard put it yesterday: "Borrow now, tax later." Senior Conservatives are currently debating whether they should propose precise tax cuts. Mr Brown has calculated that they will be in no position to do so without looking even less credible.

He is on to something. The Conservatives have rushed too quickly into another "tax and spend" trap. They claim that they will finance their plans partly by cutting administrative waste, but it is unlikely Oliver Letwin will have much more waste to reduce after Sir Peter Gershon's review of efficiency in the public sector. The Chancellor is anticipating billions of pounds worth of savings to be transferred to frontline services: parts of the civil service have never been knowingly understaffed. There is obviously scope for savings, but not that much scope.

Mr Brown has got there before Mr Letwin. This will make it more difficult for the Conservatives to explain how they will invest more in defence, the Home Office, transport, etcetera, and cut taxes, the same conundrum that blew them apart in 2001.

There will be significant differences next time. The Conservatives are led by a more formidable figure and will be a sophisticated fighting force. The election will take place in a context in which the government has openly put up taxes to pay for public services. The Iraq war has raised questions about ministerial trust. One perverse consequence appears to be that although voters recognise improvements in their own services they do not believe ministers when they argue that their increased investment and reforms are the reasons why the changes are taking place.

I doubt if such scepticism will persist for much longer. Voters are not daft. For decades they were told that public services could be improved as if by magic. Not surprisingly the tricks did not work and services went into decline. Now more investment is making a difference. Why are we surprised at this? If we want to improve the condition of our house we have to spend more money. The same applies to public services.

Indeed the same applies with such force that I predict the thorniest question for Mr Brown in the coming years will be whether he is spending enough. It is a significant achievement that Britain will soon be spending as much as other countries in the EU on hospitals and schools - a rise in expenditure that has taken place without damaging the economy or it seems the popularity of the government. Other countries have been spending at that level for a long time and on other services too. They have trained their doctors, nurses, teachers and built up their transport infrastructure.

Once Britain has caught up it will still have a long way to go. Yet some cabinet ministers will have a tough time over the next few months protecting their budgets let alone expanding them. In the build-up to Labour's next manifesto expensive ideas are being considered, including the introduction of universal childcare and a much bigger expansion of the Sure Start scheme.

Should an expansion of such schemes be financed by co-payments or by increases in public spending? Should such schemes remain targeted at those on lower incomes? For now the more potent and relevant questions are being debated within the governing party while the Conservatives struggle to make their sums add up.