Steve Richards: The missing link... where will the axe fall?

It is 'tax and spend' that will decide the next election, as it always does
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The Independent Online

Forget about the party conferences. They will come and go as they always do. The most important event of the year is the pre-Budget report to be delivered in late October or November. The event is the Government's last chance to clarify precisely where it stands in relation to "tax and spend", the policy area that decides elections. After that there will be no opportunity for further revisions. There is a limit to the number of "clarifications" a government can make.

Over recent weeks, Gordon Brown, Alistair Darling, Lord Mandelson and Ed Balls have met in various permutations to plan their latest comeback strategy, an exercise that must be starting to acquire a familiar air. They agreed that, first, they had to decide on what form the pivotal pre-Budget report should take and work backwards, so that their political message delivered this month is reinforced and given more shape when Darling unveils his proposals.

But having established the importance of a consistent and clear message, I get the impression they have not agreed wholly on what the message should be. Brown has moved a little from his summer position, in which he seemed to suggest that public spending would grow as if by magic. In a speech at the weekend, for example, he stressed that the Government would halve the deficit over five years. Even so, the pledge was buried amid a broader argument about the virtues of investment, a construct that reflects unresolved internal tensions.

Still, the fact they are planning backwards from the pre-Budget report is progress of sorts, even if it seems a fairly straightforward strategic calculation: after all, there is little point in ministers using the agenda-setting month of September to convey one message on the economy, only for another to come forward when the Chancellor makes a major statement on economic policy later in the year. Yet this has been the normal chaotic sequence. For someone with an almost Buddhist-like calm, Darling has delivered his key pre-Budget reports in an atmosphere of frenzied panic.

His first, in 2007, was framed with an early autumn election in mind, even though the campaign had been called off by the time he came to deliver his package. His pre-election pre-Budget report went ahead, full of unfunded bribes to the electorate, without an election. In a curious way, last year's pre-Budget report was even more damaging, even if most of the measures have been vindicated, including the VAT cut.

The polls in the immediate aftermath recorded a double-point lead for the Tories following a few weeks in which Labour had narrowed the gap. It was a significant turning point and one that was caused not by the substance of the proposals but by the lack of a clear message. Was it a route map towards a prudent future? Did it mark a new emphasis on fairness with tax rises for high earners? Was it a "good news package" with a cut in VAT? Brown and Darling could not fully agree, with the latter wanting to stress more the route back to balanced budgets. As a result, there were several messages, none of which were heard by voters who noted the level of debt and panicked.

So the ministerial strategy this autumn, with at least an aspiration of early clarity, is something of a novelty. I suspect that when Darling delivers his pre-Budget report there will be more emphasis and detail on the route towards a balanced budget and, therefore, on spending discipline. The preliminary manoeuvring begins today when the Chancellor delivers a lecture on the principles that will guide the Government's approach, in effect arguing that while the Tories "wallow" in the prospect of spending cuts he will take a more expedient approach, in terms of timing, pace, depth and in his view that the Government can still play a creative role as an enabler in the delivery of public services. But even this early message is hazy. Contrary to some authoritative briefings, I am told that the Government has not agreed to include the NHS and international aid as candidates for possible cuts or "savings".

Today's poll in The Independent highlights the degree to which the parties skate on hazardous terrain. The survey suggests a substantial majority of voters want big increases in spending on the NHS and education, yet other polls show that voters support measures aimed at repaying debt. As ever, it depends on the question. Few are likely to say they support high debt; equally few are likely to want cuts in spending on major public services, except some of those on the right.

How funny and depressing it is that, while Labour and Tory politicians agonise over how to pretend they can cut spending and improve public services, voters are ahead of the game in pointing to an area where they support a saving. According to today's poll, a clear majority are in favour of scrapping expensive plans to renew Britain's Trident nuclear weapons system. The leaderships of the two bigger parties, still stranded in the politics of the 1980s, are too scared to make the move.

Pre-election debates about tax and spend are more to do with symbolism than reality, they are about conveying credibility and values. I have argued before that Cameron and Osborne made an error in running away so speedily from their earlier pledge to stick to the Government's tough spending plans, and see no evidence that they have reconciled their ambitions for public services with their newly-acquired appetite for sweeping cuts. If they had kept to their original strategy, they could have claimed support for the Chancellor's spending plans, but not Gordon Brown's. Their decision to call for deeper cuts gives the Government space to argue that it will not stretch prudence to the point of reckless imprudence. But generalised promises of New Labour public service reforms that will magically save billions are nowhere near enough.

Until the parties' policies on "tax and spend" are clearer, the outcome of the next election is not as predictable as polls suggests. It is "tax and spend" that will decide the next election as it always does, symbolising a party's suitability for power and the values it espouses. Voters do not know enough about any of the parties' plans to make a final decision yet.