Leading Article: Three steps forward and one step back for Mr Brown

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The Independent Online
It's all very well wanting to build the New Jerusalem but you really need to know what the completed structure should look like. The chief architect's next big day is coming up on 17 March: the day when Gordon Brown unveils the latest draft of the plans. Many of the important themes have already emerged, of course. The old Budget purdah has been swept away, and the practice of trailing policies well in advance means that the Chancellor's big speech will be much less of a lightning-bolt of executive diktat than it was in the past.

But we are still some way from a clear "big picture" - the sort of thing the Prime Minister wanted us to keep our eyes on throughout the distracting blizzard of politico-sexual trivia.

The central idea of the Budget is work, as in "welfare-to-". The Chancellor will try to tilt the incentives generated by the tax and benefit system sharply in favour of work. There are cavils, but the focus is right. The most important cavil being that work cannot bring social justice or social inclusion to pensioners. The debate on future pensions is well advanced, but the plight of existing poor pensioners has been sadly overlooked (along with the intriguing question of the extent to which older people themselves should be encouraged to work).

Another secondary theme is also emerging: that of a shift from cash benefits to tax reliefs. The most important of these is the move to abolish Family Credit, a benefit paid to top-up low wages for families in work. Mr Brown wants to replace it with a Working Families Tax Credit - in effect a tax deduction designed to achieve the same end. Much depends on the details, but a surprisingly persuasive case is now being made. The main objections to a tax allowance were that it would transfer money from mothers to fathers in two-parent households, and that it would impose an administrative burden on small companies. The Treasury claims to have "cracked" the first problem, and the second has to be balanced against the bureaucratic complexity of Family Credit in any case. Above all, though, the psychological advantage of shifting to a culture where people feel that they stand on their own feet rather than relying on state handouts should not be underestimated. And it is underpinned by the simultaneous introduction of a minimum wage, probably at around pounds 3.50 an hour.

A persuasive case has yet to be made out, however, for the new starting band of income tax at the rate of 10p in the pound. This is a gimmick, albeit with a symbolic value as a tax cut, which will have the perverse effect of benefiting higher-rate taxpayers more than the less well-off, because it will take a slice of their income out of the 40p-in-the-pound tax band as opposed to the 23p standard rate.

Mr Brown may well claw back this effect through higher employers' National Insurance at the top end of the scale - indeed, he must do so. (He cannot put up employees' National Insurance because of a pledge dating from the party's hammering on the subject in the 1992 election.)

The emphasis on incentives to work, then, is promising, and the Chancellor is right to take a similarly dour view of pleas for more public spending. The "war chest" alleged by the Liberal Democrats is, rather, a hypothetical crock of gold at the end of the rainbow, not available in the here and now, and not available at all if, as seems increasingly likely, the economy is entering a recession.

There is, though, one welcome break in the puritanical clouds: Chris Smith, the Culture Secretary, has lent his support to the campaign launched by The Independent and the Independent on Sunday to extend tax relief for financial support for the Arts. The Treasury is considering a change to allocate tax relief to the giver rather than the recipient of charitable donations, which could indeed save many of our threatened artistic institutions.

But there is an important omission in Mr Brown's thinking: building the New Jerusalem also needs a green vision, and there is an urgent need to rebalance the tax system in favour of environmental sustainability. All the Government's laudable words at the Kyoto climate summit will turn to dust if heavier taxes on energy (and lighter taxes on energy-saving goods and services) are not imposed. The "dash for gas" by electricity generators, from inefficient coal, has achieved much, but the rest will not be achieved by exhortation alone.

Budgets, however much they are foreshadowed by the spin doctors and the sloganeers, are still turning points. To govern is to choose, and many of the biggest decisions are still concentrated in a single day - decisions which define the big picture. On the evidence so far, Mr Brown will deliver a creditable Budget: three steps forward, one step back.

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