Alistair Darling has delivered a pre-Budget report closer in spirit to one of the panic-stricken mini-budgets that punctuated the 1970s. This time the panic was political rather than economic. The Chancellor made announcements aimed at reshaping the political landscape with immediate effect. It was almost as if general election fever was raging still. In one way it was. Mr Darling launched the start of the campaign even if an election is not held until 2009.
Predictably, the Chancellor deprived the Conservatives of their main political weapon by raising the threshold on inheritance tax to £600 000. Last week, the Conservatives made waves by raising the threshold across the board to £1 million. Astutely, Mr Darling argued he would not be so generous, but would invest more on schools and hospitals instead of millionaires. Gordon Brown's famous dividing lines are back in place. Expect to hear the choice for voters expressed along these lines: "Do you want a Tory tax cut for the wealthy few or Labour's tax cut and investment for the many?" In the meantime, and equally important, Mr Darling announced he would tax non –domiciles, the source for the Tories' proposed tax cut. The Tories have lost their policy and the means to pay for it.
In response, the shadow chancellor, George Osborne, had a strong case when he claimed that he was leading and that the government was following, although he was pushing it a bit to claim the Conservatives were winning the battle of ideas. No party has enough ideas at the moment for a battle to take place. Still, the focus on inheritance tax and non-domiciles would have been considerably less intense yesterday if it had not been for Mr Osborne's speech to the Conservative Party conference last week.
But voters are unlikely to be grateful to Mr Osborne for very long. They will take the money and move on. Anyway, Mr Darling's alternative is not a precise imitation. No doubt Mr Brown and his old adviser in the Treasury, Ed Balls, played their part in delivering the political contrivance of a tax cut and an additional spending increase for the same money that the Tories plan to spend alone on reducing inheritance tax.
In the post-Brown honeymoon, it is possible that the Government will be punished rather than hailed in the short term for so nakedly killing off the inheritance tax issue. Such unsubtle defensiveness is an open acknowledgement of vulnerability and sudden weakness after the displays of confident machismo at the Labour conference. But on this specific issue Brown/Darling had no choice. A single populist tax policy had transformed the fortunes of the Conservative Party. In order to move on from the self-inflicted crises of recent days, the Government had to deal with it immediately. As far as Labour is concerned, this will deal with it. The Conservatives will not go into the next election parading their policy in the way they have done with such success in recent days.
As I wrote yesterday, the impotence of opposition is draining. Once Mr Osborne has enjoyed the flattery of imitation he will need to return to the drawing board. There are not many laughs in the familiar sequence in opposition of coming up with ideas, having them more or less stolen, and finding there is a need for more ideas to fill the vacuum.
Mr Darling also faces a period without much cause for laughter. Behind the headline-grabbing announcements on inheritance tax, the Chancellor confirmed that he was revising his growth forecast downwards. He did so in a context where public spending was already being reined in. The squeeze on spending is the great sleeping issue in British politics. Soon it will come alive. The NHS and education fare relatively well, but the cash will prove to be nowhere near enough. Increased demands of a growing elderly population, improvements in medical technology and higher expectations of the public will mean that before very long there will be talk of a shortfall in NHS funding. Mr Brown aspires to reach the same spending per pupil in state schools as the level in private education. After this settlement, he will aspire for much longer.
For the next few years government departments will be facing tasks they are more familiar with, dealing with tight budgets rather than generous ones. In much of the British establishment, public spending is regarded still as a sin, while private excess is celebrated as a sign of a booming economy. In Middle England, pivotal voters live in neat houses with more plasma TVs than they can watch. When they leave their homes they are faced with filthy streets, trains that do not work and hospitals that cannot compete with the rest of Europe. Yet they want more plasma TVs. That is why inheritance tax is cut and Britain does not have a high-speed train service.
The manner in which public money is spent is a big issue and one that the Conservatives can make more of. Far too much is wasted in a country unsure how to invest in public infrastructure and services. Yet the level of cash matters too. Before long, the question that will be asked of Mr Brown and his Chancellor is not whether they are planning to spend too much but whether they are spending too little.
Almost certainly, those asking the question will include the Conservatives. Or, to be more precise, they will be tempted to argue that more cash is needed in specific services. Already they do so in relation to defence, where Britain spends too much in a deluded attempt to punch above its weight. But the tight spending round presents the Conservatives with a dilemma as they put the case for further tax cuts as well as spending increases. The Conservatives have lost elections failing to make their sums add up. Over the coming years there is even less cash to make up the sums.
Yesterday's statement was a work with three performers. Gordon Brown wrote most of it. George Osborne supplied some of the policies. Alistair Darling delivered the script. That is the limit of the tripartite co-operation. In an 18- month election campaign, the main parties will need distinctive policies after their jointly fearful dash for tax cuts. So ends the opening depressing round of the long campaign in which the Conservatives sought out tax cuts quickly because they feared an election and Labour countered timidly because they had been forced to call one off.Reuse content