Steve Richards: So who said what to whom? The truth about the cuts debate

The decision to put up taxes again caused angst beyond the Treasury

Related Topics

I must have read and heard more about the ministerial infighting over last week's pre-Budget report than is healthy for anyone, the equivalent of watching a long American soap opera in a single sitting. For those who lead healthier lives I will offer a brief summary of what is said to be the story so far.

The Chancellor, Alistair Darling, had a tough time of it at the hands of the reckless Gordon Brown and his sidekick, Ed Balls. Darling is increasingly assertive, an economically realistic and politically attuned Chancellor. Sadly he is hampered by his neighbour who is disastrously obsessed about dividing lines with the Tories.

Balls wants to spend more on education in order to improve his chances of becoming the next leader of the Labour party. Quite sensibly the Treasury wanted to increase VAT rather than put up national insurance contributions. Equally sensibly Darling wanted to spell out in more detail how the cuts would fall. He had the full support of Peter Mandelson who has fallen out fatally with the Brownite entourage. As a result of this calamitous pre-Budget report, the Government will not dare to have a Budget next spring. Therefore the election will be held in March and Labour will be slaughtered.

Writing this summary, I feel as Hercule Poirot often does in the middle of an investigation when he turns to his own sidekick, Hastings, to declare "Mon ami...This doesn't feel right to me. There is something we are missing".

Part of the gap arises from the internal contradiction in the accounts. How could Darling be both more assertive and yet hugely disappointed with his own pre-Budget report because Brown and Balls prevailed over him? There are other elements that do not quite add up.

Most fundamentally the participants have a background, a past, that does not make sense in this new narrative. I know it is unfashionable to make this point nowadays, but when Brown and Balls were at the Treasury they managed to forge economic policy in ways that were electorally popular and at least credible at the time. Of course, they were operating in an almost comically more benevolent climate, but Labour chancellors tend to be persistently unpopular whatever the economic circumstances.

I do not believe that Brown and Balls are politically illiterate or have suddenly become so. Conversely, I would be surprised if Darling has acquired so quickly all the titanic skills required to meet the immediate challenge and would be flourishing if it were not for the lunacy of the Brownite entourage. Darling's genius in previous ministerial assignments was to keep his policy area out of the news altogether. The collapse of the economy cannot go unnoticed in quite the same way.

I note also that the source of a revelation tends to be treated by journalists as authoritative and those on the other side of the source's argument as wrong. Would a further Treasury-inspired rise in VAT have been more popular or wiser economically as some reports imply? I suspect that there will be a gloomy enough mood when VAT returns to its old higher rate of 17.5 per cent in the New Year. Similarly all parties agonise about whether giving more details of sending cuts is the right pre-election move.

If Poirot had probed further, he would have discovered broad agreement between Brown, Balls, Darling and Mandelson about the overall strategy, protecting front-line services, putting up taxes as part of the package, and making clear that the deficit would be cut. Most specifically there was no argument about the need to maintain spending levels for another year. Darling also agreed several months ago that spending on education would go up slightly in real terms.

His dispute with Balls was over the presentation of this decision. The Treasury wanted the focus of the pre-Budget report to be on the stringency of its approach and not to highlight the increase in spending. Balls thought it was ridiculous to hide a decision that showed how the Government was prioritising education in an otherwise bleak set of plans. He had a conversation with Darling on the Sunday before the pre-Budget report and his officials were engaged in discussions with their Treasury equivalents until the final moments to ensure that what Balls regarded as a positive message was not underplayed or ignored entirely. There was no row between Balls and Darling about the principle of an increase in spending on schools.

At several meetings with Brown Darling also made it clear that the Treasury preferred a VAT rise over an NIC increase and that it wanted to spell out in more detail where future cuts would fall. But some ministers believe that this was not necessarily Darling's own settled view and that as an MP representing a relatively marginal seat he was aware of the downside of an even tougher approach in a statement that already included more overt tax rises than any government had introduced for decades.

The actual strategy was less timid than most reports conveyed. The decision to put up taxes again, with a further increase in NIC contributions, was one that caused angst beyond the Treasury. Brown had his doubts at one point, not surprising for someone who became a chancellor in 1997 convinced that it was politically impossible to make the overt case for any tax rises. Now he contemplates an election with VAT going back up, income tax rises for high earners, a phased NIC increase, which is another income tax increase for all but low earners.

That decision was made partly to give some credibility to the limited spending aspirations and to signal the Government was willing to make unpopular decisions in order to repay debt over time. Electoral calculations played their part too. Will the Conservatives put up VAT in their emergency Budget? How will they pay for their schools programme if they do not commit to Labour's increase in spending? Such questions are widely dismissed as those silly old "dividing lines", as if disagreement is unhealthy, but politics is partly about a divide based on values and expedient judgement connected with those core beliefs. The fuss over dividing lines is a red herring.

Other highly charged issues are much more significant, although they are not directly connected with specific economic policies. Darling feels a deep sense of personal betrayal that Brown contemplated ditching him for Balls last summer and is at the very least relaxed if the media hails his supposedly more prudent approach. Brown still rates Balls' judgement on economics and politics more than any other figure, not easy for a Chancellor.

Meanwhile, some Brownites complain that Darling is not a robust enough advocate at pivotal moments, such as last week. Other cabinet ministers fume to journalists about Balls' largesse as they contemplate heavy cuts in their departments. Peter Mandelson is still far from thrilled at Brown's manoeuvring in Europe that resulted in the relatively obscure Baroness Ashton securing the foreign affairs portfolio.

But he remains engaged and spoke to Balls at length before the latter gave an interview to Andrew Marr on Sunday. Both agreed that it was necessary to play down talk of a March election. My strong sense is that all the key players in the Government are working on the assumption that the election will be in May and want to present a spring Budget by which time they hope there will be more critical focus on what form a Conservative alternative would take.

Mon ami... Take a deep breath. There is still a long way to go.

React Now

  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Ashdown Group: Front-End UI Application Developer

£30000 - £40000 per annum + Benefits: Ashdown Group: Front-End UI Application ...

Recruitment Genius: Digital Account Executive

£18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Service Engineers - Doncaster / Hull

£27000 per annum: Recruitment Genius: Domestic Service Only Engineers are requ...

Recruitment Genius: Employability / Recruitment Adviser

£23600 - £27500 per annum: Recruitment Genius: The Employability Service withi...

Day In a Page

Read Next

Errors & Omissions: how to spell BBQ and other linguistic irregularities

John Rentoul

South Africa's race problem is less between black and white than between poor blacks and immigrants from sub-Saharan Africa

John Carlin
Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and to give free concert as part of the Global Poverty Project

Mary J Blige and to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...