Leading Article: Sacred cows should expect no mercy

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The Independent Online
The season's game is kite-flying. There they go, in their shocking colours - a dividend tax, charges for home visits by GPs, mass redundancy among teachers, the sale of London Underground. Some are substantial, others rickety paper-and-string affairs that have been aloft before. Departmental ministers have every interest in upping the ante even in a year when there is supposed to be no spending round. Chancellors have every interest in throwing dust in the eyes of teenage scribblers in the City. Ministers without portfolio have an interest in making Tony Blair appear a Prime Minister unafraid to "think the unthinkable" without the horses getting frightened by the consequent thoughts, especially about the dear old National Health Service.

With a budget only a fortnight away, such gamesmanship is only to be expected. It is even welcome in reminding us that modern British government is necessarily plural; what is the point of cabinet government unless cabinet ministers permit themselves at least occasionally to think impure thoughts on behalf of their clienteles. But the game-players need to understand one thing - something that will remain true even if the National Audit Office does what is expected of it and delivers a report this week showing great gaps in Kenneth Clarke's projections of spending and revenue. This is that Labour won on the back of specific promises on personal income tax and aggregate spending. During the campaign we quoted on our front page that bon mot of Jean-Jacques Rousseau to the effect that the British were free only once every few years when they voted, otherwise they were in thrall to a powerful authority. Nowadays it won't do. The efficacy of government depends on continuing trust. An election is a kind of compact. Labour's effectiveness in office depends critically on the maintenance of confidence, which would be shattered if that cardinal promise about taxing and spending were broken.

Gordon Brown can still let his fiscal imagination soar. Selling all or part of London Underground should be only the beginning of a rigorous review of state assets which consistently asks: is this public purpose best fulfilled by public ownership or by some mixed scheme of contracting and privatisation. (The only relevant questions for the Tube are: how to secure effective management and better service without excessive fare rises. The practical answer looks like some kind of sale of the network allowing the private sector to unlock its property value.)

Keeping the average citizen's income-tax payments constant does not preclude changing rates or allowances. Labour's challenge is not finding the bits and pieces but budgeting strategically - ensuring that the signals sent by changes in the tax regime speak of its values and priorities. Abolishing the tax credit on dividends has to be judged on whether it discourages personal pension provision; would it make companies more likely to invest retained profit? New taxes can have unintended consequences. Look at the way the system is encrusted, despite Nigel Lawson's efforts, with distortions. Mortgage tax relief is a relic which could be abolished without infringing Labour's promise on income tax - it is a form of bribery for a certain category of property purchaser which distorts the market and contributes to an inflation proneness. If, as reports suggest, the Government has got chilly feet, more is the pity; the rumoured increase in stamp duty would only partially compensate.

Labour's tax promise was for the duration of the Parliament. Its spending promise was only for two years. Pressure to spend grows the nearer an election gets. So unless Gordon Brown gets his retaliation in first, he is never likely to have the chance again. If ever he is going to be an iron man on the spending front, now is the hour.

But controlling spending ought not to be some mindless exercise in nay- saying. The Comprehensive Spending Reviews announced last week ought to be rich and creative. It is hard to believe that the Thatcher-Major years have squeezed every excess penny out of the public purse. One of Mr Brown's problems is whether, the Treasury having lost staff, he will be imaginatively advised about the sacred cows and the bleeding stumps; the indications are that the team assembled at No 10 will be useful allies. But spending reviews are only as good as the political imperatives that drive them. It is not enough, for example, to ask hard questions about Britain's excessive defence budget; the time has come for cancellations of orders and further retrenchment on service numbers and sites.

Tony Blair has made his political fortune by cracking shibboleths. Official spending plans are still littered with what are effectively excuses for public employment rather than lean machines for delivering services. There are virtually no problems in the 1998-99 round that would not be solved overnight by freezing public service pay. On spending, most evidence is tainted by special pleading. Health may be an exception. It was evident before the election that by the autumn deficits would be biting back in the form of reduced hospital admissions. Frank Dobson got into trouble last week for promising to think hard about charges; even more challenging would be to think harder about spending. In schools, too, the voices of teachers and heads and governors need to be heard, but not necessarily answered in every word. Mr Brown may during the summer come to be convinced by the case for extra spending on education and health. But the Government remains obliged to revise departmental totals for education and health only by adjusting spending elsewhere - downwards.

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