Leading Article: Facing the taxpayers

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IF JOHN MAJOR and Bill Clinton were to chat over a glass of Norman Lamont's favourite Scotch this weekend, they might chuckle at their good fortune. For, within a month, each has presided over and, at least for now, survived tax increases which in the past would have prompted a political lynching. Smaller indiscretions on taxes cost George Bush the presidency and closed the door of No 10 to Neil Kinnock.

The scale of these new taxes is huge: in Britain an extra pounds 10.3bn, equivalent to 7p on the rate of income tax, will be taken by the Treasury within three years. Meanwhile Mr Clinton has raised the income tax rate for the better-off from 31 to 36 per cent and introduced a surcharge for those earning more than dollars 200,000. A host of spending cuts accompanied his budget.

One can imagine the Prime Minister and the President confiding to each other that the going has been tough on both sides of the Atlantic: it is not easy getting away with lies to the electorate. As John confessed to his discarded pledge that he would not increase VAT, Bill might blush over his broken promise to lower middle-class taxes.

The two men would recognise that they faced similar problems: narrow political mandates, rising deficits, shaky economic recovery, high unemployment and a need to appease the financial markets with fiscal discipline. They found similar solutions. Both have taken difficult decisions, hitting politically sensitive targets such as fuel costs and consumer spending power in general. But in each case much of the pain has been delayed in order not to damage nascent recoveries.

Mr Clinton's proposals will, by 1996, add about pounds 10 to an average monthly fuel bill. It sounds like Norman Lamont's VAT increase: Mr Clinton even used the green defence. He even raised taxes on the American sacred cow of social security - the contributory pension scheme. Federal wages were frozen for this year and will in future rise by 1 per cent less than the inflation rate - a tighter squeeze than the Conservatives have dared to contemplate here.

Despite the similarities, Mr Clinton, though no instinctive friend of the Tories, might after a few drams suggest that Mr Major could learn something from him about the black art of public relations. The President immediately went on the campaign trail after announcing his programme, while Mr Lamont is still stumbling around Westminster trying to prove that he is not going to freeze elderly people to death.

As a Democratic president, Mr Clinton has enjoyed an advantage over the Conservatives. The poor trust him. He can also thank Ross Perot for educating the electorate about the budget deficit, which in Britain is a more recent phenomenon, largely ignored in the general election. Furthermore, the President has greater room for manoeuvre. He starts with low income tax and has enjoyed a stronger economy, better able to withstand a budget squeeze.

But perhaps the difference also has something to do with social solidarity. Mr Clinton can sell the unpalatable in the United States because he convinced the public that everyone would suffer together. The millionaires' surcharge may make little difference to revenues, but for those who have little it is reassuring to see those with more pay their share.

Mr Clinton also squarely addressed the difficulties of the poor when he presented his programme. Without confusion or mystification, he set out the wage subsidies that would protect the poor from tax increases. The confusion of voices coming from the British Cabinet over the past few days has done little to inspire similar confidence in Britain. Mr Clinton campaigns with a homely and classless style, like that pioneered by John Major last year. Perhaps the Prime Minister needs to remember that it was precisely this image which the electorate found attractive, and which he would be rash to endanger.

Britain has not heard the last of the sacrifices necessary if the recovery is to be kept on track over several years, as it must be if unemployment is to fall sharply. A rising balance of payments deficit could easily slow an upturn by forcing the Government to apply the brakes to home spending, and hence imports. The Prime Minister is right to stress the importance of manufacturing industry, which is responsible for a disproportionate share of export earnings.

Ensuring sustainable, long-term growth, and avoiding any repeat of the familiar litany of boom and bust, means honestly facing these issues. In the US, Mr Clinton and Mr Perot have educated the public and can baldly say: 'Let's just face the facts.' Mr Major's Government has yet to create either a similar understanding or a similar bond of shared sacrifice.

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