To the markets, with their pursed lips about Britain's massive budget deficit, Mr Lamont responded like Billy Bunter confronting the clean-living schoolboys of Greyfriars. 'I say, you fellows, there's a pounds 6.5bn postal order on the way from my old Auntie Taxpayer. Don't be beasts]' The first signs were that the markets won't be beastly, at least for the time being, and that no howls of 'Yarroo]' will erupt from the Treasury.
And, to be fair, Mr Lamont did his best to tie himself, and his successors, down. Announcing taxes, indeed legislating for them, two years in advance, is clever economically but has a serious political risk attached. It allows the Chancellor to take a tough-sounding approach to the deficit while not stalling any recovery. But it also means that there will be substantial increases in taxation not so long before the next general election. The customary approach to the electoral cycle is that the fiscal pain is inflicted early, leaving room for pre-election tax cuts. This looks perilously close to reversing that and inflicting the pain at the most sensitive time politically. The long march to a 20p basic rate of income tax shuffles forward. But yesterday's announcement would be the equivalent of an 7p in the pound increase.
Will the markets believe that Mr Lamont, or his successors, will actually go through with the promised extensions to VAT and increased National Insurance contributions? John Major's hidden hope is presumably that the recovery will be strong enough to sweep away much of the deficit, exposing only a modest proportion as structural; and that yesterday's tax rises will never have to be implemented.
Meanwhile, we must trust the Government to do in future years what it says it will do. All the more embarrassing, then, for John Smith to read back Mr Major's general election reply to my colleague Tony Bevins, when the Prime Minister promised that 'we have no need and no plans to extend VAT'.
Still, when it comes to a choice between swallowing pledges and behaving thoroughly irresponsibly, it is probably better that Mr Major closed his eyes and gulped. It wasn't the greatest day for his political reputation, but the Government desperately needed to raise taxes sooner or later. It was acutely embarrassing, but preferable to sitting virtuously on your hands and hoping for the best. Choosing National Insurance contributions rather than income tax was cosmetic. Going for petrol and domestic fuel rather than 'sewage and newspapers', as Mr Lamont so elegantly put it, was environmentally sound, but will depress and anger poorer families living just above benefit levels. At least no one can credibly accuse Mr Lamont of seeking cheap popularity.
He gave more of the broad perspective about Britain's place in the world than has been customary in recent years, and that was welcome. The combined tax-and- spending statement in November will, must, encourage him to go further.
Meanwhile, the most interesting thing about the Lamont world view was the extent to which it reassured Tory backbenchers with some old-time Thatcher religion. There was some heavy Brussels- bashing. Mr Lamont was unable to sound convincingly contrite about the dramatic impact of Black Wednesday; and indeed approvingly quoted his economic advisers to the effect that it was the collapse of the Government's previous economic policy that had done more than anything else to usher in the recovery. I know that is an old irony, but it was striking to hear it so blandly referred to, nevertheless.
Mr Lamont would have been warmly applauded by Baroness Thatcher, too, when he argued that the great medium- term threat to British prosperity was not lack of demand in the economy but much greater government borrowing. And that, by the way, gives Michael Portillo, the unreconstructed Thatcherite Chief Secretary, who is much favoured as a future leader, his big political opportunity. Mr Lamont implictly linked the prospects for future tax cuts to Mr Portillo's long-term review of public spending. The Conservative Party will remember, and watch.
It may be, finally, that the most significant longer-term aspects of this Budget are the detailed package of measures to help businesses, loosening up the tax regime for small outfits, and introducing specific aids for exporters. These are matters that provoke the most asinine reaction from some Labour MPs ('A Budget for spivs,' shouted one), and also send many Conservative gents to sleep. But Mr Major and Mr Lamont both ardently believe that unemployment will be brought down by the small businessmen.
Now that belief should be tested once and for all. The results will come only slowly, and the finicky nature of the measures means that few new jobs will be credited to them. Even so, the entrepreneurs now have almost everything they need to prove Mr Major and Mr Lamont right: lower taxes, less paperwork, low interest rates, low inflation. Some will even be paid to take on people who have been unemployed. If they cannot do it now, can they ever do it? By the time we have to pay for those taxes on tick, the answer should be clear.Reuse content