Leading Article : Whisper it: Blair may have to raise taxes

Click to follow
The Independent Online
Our front page calculation is simple and it is damning. The figures are above suspicion, the Government's own; you don't need a GCSE to do the addition. Public expenditure during the past decade and a half has been sustained only by massive borrowing and the application of the huge, one-off proceeds of privatisation and North Sea oil. As a party of financial probity the Conservatives have been living a lie. As a nation we have, to put it in those household terms beloved of former prime minister Thatcher, been living more and more on tick.

Much-vaunted income tax cuts (indirect taxation has, of course, been rising) have been paid for by loading up debt and selling the family silver. That debt now hangs dreadfully heavy, as an item of current expenditure for interest payments and a commitment on our children to keep on paying. These figures are history. They shape and constrain the operations of government now. The mess British public finance is in ought to be a constant reference point during the election campaign to come, for both parties. It is a mess created and concealed by the Tories, yet it is an act of concealment to which Labour is assenting. Go back to 1979 and start adding up the income of the state. First there are the proceeds of taxation, value added tax as well as income tax - we must not be fooled by that Conservative fixation on direct individual tax, aided and abetted by its economically illiterate claque in the newspaper press. Then there were the milk floats and Sid and the resulting special supplements to government income from privatisation. Now subtract the pounds 3,000bn of government spending since, noting (with surprise) how this has been a social policy government, in the sense that it has increased spending on health and education, but above all it has pumped billions into social security, much of that money to support increased numbers out of work.

Lo and behold, the result is a negative figure. Spending turns out to be bigger than the sum of revenues. All those homilies from Lady Thatcher, all those patronising lessons from Lord Lawson ... To maintain spending it has borrowed and borrowed. The indebtedness of the British state has tripled since 1979. National debt has proudly kept up with the growth in national income over the period. How many times, during the 1980s, did snooty commentators and Tory Treasury ministers pooh-pooh suggestions that the tax revenues from the North Sea oil bonanza represented a special flow of income that should not be squandered in payments to the unemployed, their numbers swollen by the Government's own policy errors? As for privatisation, that great jewel in the crown of Conservative performance in the 1980s and 1990s, its proceeds have paid for - what? For unemployment and cuts in higher-level income tax. The Government defends its record by pointing out that general government debt at about 54 per cent of GDP is lower than in most other countries of the European Union, though only marginally less than in France. Government spending in Britain, as a proportion of national product, is also lower than in neighbouring countries. But that is not really the point: it is how we have chosen to pay for levels of public spending. We have been living on one-off inflows and increased borrowing. And the facts of life now are that there are no more North Sea windfalls. There are no further large-scale privatisations. Borrowing cannot go on at its present level because of the burden of interest payments on debt. There is no need even to pray in aid the criteria set down in the Maastricht Treaty for convergence among the member states of the EU prior to decisions about a single currency: on present and projected levels of deficit between income and spending, Britain fails the test. These figures are not just damning for the Tories. They would be a vice for Gordon Brown, too, were he to become Chancellor. Its jaws are unforgiving: historic patterns of public expenditure cannot be afforded. Labour can look to no privatisation proceeds. Its European sympathies would make the Maastricht criteria even more compelling. The arithmetic allows only one conclusion - for Labour, even New Labour, cannot and will not engage in large-scale cuts in existing levels of public spending. Taxes will have to rise.

This is the modern political equivalent of the love that dare not speak its name, the latter-day version of Harold Wilson's decree of omerta over devaluation, the Blairite equivalent of the Wittgensteinian injunction - about that which we cannot speak, let us be silent. Tax increases are the great unmentionable, and the only way out of the public spending morass. Mr Brown and his colleagues purse their lips for a good reason. They stand to be pilloried in the press for even breathing the T-word. That claque which so applauded Thatcherite mismanagement and hailed Lord Lawson's income tax cuts - the true cause of our misfortunes - will round on any Chancellor who proposes to put the fiscal house in order.

But Mr Brown's silence can only last so long. If he became Chancellor he would have to act. His is an ugly dilemma: to go into the polls knowing what has to be done, but afraid to tell a home truth to a British public gulled by successive Treasury con artists. In such dire circumstances we might agree that discretion is the better part. But Mr Brown had better be preparing a convincing story to tell the public when the day comes and taxes have to be raised. He could do no better than start with the figures presented today, using them in the bitter re-education of the British public. The national treasure has been squandered by a Government purporting to be the pillar of rectitude. It sustained itself by a kind of bribery. The challenge facing Labour, in office, is the politics of fiscal honesty.

Comments