Leading Article: Rationality breaks out

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AS A democracy, Britain has much to be proud of. But from that can safely be excluded the manner in which the Government decides how to raise and spend its revenue. The ritual of the spring Budget, prepared in undemocratic secrecy and without prior discussion of major tax reforms, has always reeked of political show business. With the Chancellor always tempted to play to the gallery, a context less propitious for rational calculation is hard to conceive.

Even more irrational has been the separation of the revenue-raising decisions of the Budget from the autumn statement on government spending. That, in turn, has traditionally been preceded by the puerile spectacle of each cabinet minister being seen to do battle for his department's slice of the available funds. From the Westminster perspective that colours so much, the political virility of every minister is on the line, each being judged, not least by his or her own civil servants, on success in bringing home the bacon.

Now a more mature approach is being adopted - and not before time. This spring the Chancellor, Norman Lamont, announced that from next year the Budget and the autumn spending statement will be merged; and on Wednesday the Cabinet agreed that from 1993 the present system, under which ministers bargain bilaterally with the Chief Secretary to the Treasury for extra spending, will be scrapped. Instead, the Cabinet will fix a firm limit on overall expenditure. If one minister wins more, another will lose. More collective discussion of priorities must result.

Previously, it was up to the Chief Secretary to reconcile the various departmental bids with the Government's targets, with a 'Star Chamber' committee as a court of appeal. In future, the Cabinet will set the overall spending limits, and a Cabinet committee will hold the ring on their distribution. The general increase in spending has meanwhile been fixed not just for next year, but for the following two: it is called the 'new control total'. Unemployment-related benefits and debt interest, both subject to wider economic forces, are excluded.

The old system never made sense. It was intellectually ridiculous that departmental bids should be seen as a trial of strength between ministers. Because there was no fixed ceiling on expenditure, the procedure inevitably tended to ratchet up the overall total - despite the Government's target limits. It was also illogical that when the expenditure of local government was being firmly capped, the Government should apply less stringent standards to its own housekeeping.

The effects will be less obviously painful than at local level. But the Government will find it hard to fulfil the spirit of its election pledges - on the NHS, on schools and on transport systems, for example. Local government will have to be nursed through the introduction of the council tax and of care in the community. At a political level, failure to meet the new targets will carry a high price. Having already, with John Major, pledged to maintain the pound within the ERM, the Chancellor has now added another firm commitment. Yet should political or economic necessity so dictate, it is hard to see how some adjustment could be avoided. As an act of financial management, the new system represents progress. As a durable form of control, it is likely to prove fallible.