Leading Article: Conjuring tricks and pre-election treats

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It seems such a straightforward political choice: money for tax cuts or for an underfunded NHS. With hospital trusts likely to go pounds 300m into the red this year, the clamour for more health spending has begun. But Ken Clarke is resisting, insisting that spending must be squeezed - presumably to pay for pre-election tax cuts instead.

To be true to historical form, Labour should now be leaping up and down demanding more spending on the health service. The choice in the election would then be clear: vote Labour for higher taxes, doctors, nurses and hospital beds; vote Conservative for money in your pocket.

But it isn't as simple as that. For a start, Labour is not playing ball. There is indeed an immediate choice to be made between pounds 300m to make up the hospitals' shortfall, and pounds 300m towards cutting inheritance tax (for example). But proper health care versus tax cuts is not the most important trade-off - either in the Budget, the general election, or the next five years. Nor is there a long-term crisis in health spending. Contrary to expectations, the health service has not been seriously squeezed during 17 years of Conservative government. Today we spend a higher proportion of our national income on health than we did in 1979.

And there is no good reason why health's share of the national cake should be rising any faster. We are a healthy nation. If, as we get richer, we want to spend more as individuals on our health then we should put the money into healthy food and exercise - a far more cost-effective way of improving health than shortening waiting lists.

This year a specific problem has emerged. The health budget hardly increased, compared to the increases in previous years. Yet demands on hospitals continue to rise, with the growing elderly population and an unexplained increase in accident and emergency attendance. No wonder then that the hospitals are in trouble. The Government would be wrong to use tax cuts as a reason to avoid bailing them out. But pounds 300m isn't going to bust the bank. It makes up less than one per cent of spending on the NHS, and is nothing in comparison with the billions needed for significant tax cuts.

If Kenneth Clarke is planning a substantial Budget giveaway - cutting the basic rate to 20p for example - then the hospital trust shortfall will be small change in comparison. If he can find that kind of cut in spending somewhere else (or that level of figure fiddling) then there seems little reason why he shouldn't fit in another pre-election health spending bribe as well.

The more serious risk is that the Government will be so determined to produce substantial tax cuts that it will deny resources to other areas that badly need it. Education, rather than health care, is the area that really requires more investment over the next decade, whether we pay for it publicly or privately. Improving the quality of schooling, giving children with difficulties the attention they need, delivering books and computers to the classroom, and recruiting and motivating top quality teachers all costs money. The Liberal Democrats make a plausible case when they argue that taxes should actually go up to pay for better education. Whatever happens, taxes certainly should not be cut when the extra cash can go on education instead.

Nor should the Government pretend that tax cuts can be paid for without any painful spending cuts tomorrow. When you have a pounds 300bn budget to play with, a few conjuring tricks here and there are quite sufficient to bamboozle everyone for a few months. Burying a funding shortfall somewhere in the public sector pay bill is one popular tactic; so is slashing capital spending. But those games cannot be played for long.

It would be dishonest for the Government to promise huge tax cuts when the nation cannot really afford it. If Kenneth Clarke announces in his Budget next month that the basic rate is going to be cut to 20p, then the next government, whatever its political hue, will have to find a way of raising taxes again or cutting spending to make ends meet - just as it did after the 1992 election. There seem to be hints around in the political back-alleys which suggest the Tories may be about to pull the same deception they pulled on voters in 1992; portraying themselves as the party of tax cuts in contrast to Labour tax rises, when in fact they know that the cuts must be paid for by someone, somehow, somewhere.

Labour - in its determination to make sure the Conservatives can't repeat the trick - risks its own dishonesty. Eager not to be portrayed as the high-spend, high-tax party, it risks endorsing the idea that tax cuts are painless. Reducing tax for the poorly paid is an admirable aim, not least because it could encourage employment. But in the short term tax cuts at the bottom end will need to be paid for by tax increases at the top, or by identified cuts in public spending.

As our nation gets richer, and our economy grows, there is more money for governments to play with. But there are new demands, too. Taxing and spending decisions, especially in the short term, are trade-offs. Voters are often wiser than politicians think: they will not forget that they were treated, then tricked, last time around.

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