Political Commentary: Lamont presses survival button

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The Independent Online
FOR A man who last weekend derided the idea that 'you can push a few buttons and the economy behaves in a particular way', the Chancellor, Norman Lamont, seems to have pushed an awful lot of buttons. Last week's Budget was one of the biggest in recent history. It abolished one tax and made some dauntingly complicated changes to others. It took almost two hours to deliver and laid the basis for two Budgets to come. It was even heralded by its

supporters as a Budget for the environment.

The image of Norman Lamont as the jolly green giant of Western finance ministers is a seductive one. But the environmental justification for putting VAT on domestic energy could never disguise the fact that its real purpose is to raise revenue. Mr Lamont is proud of the natural beauty of his native Shetland Islands and he is a keen bird watcher. He is as eco-friendly as the next man. But it is a safe bet that whatever else has been keeping him awake at night recently, it has not been grand thoughts about the future of the planet.

On the Richter scale of broken election promises, the decision to impose VAT on fuel ranks high, even if it is not quite at the top. Before the last election, John Major initially said he had 'no plans' to increase the rate of VAT. But the Treasury was shocked that he was subsequently forced by the Opposition into an unequivocal declaration that he would definitely not increase the rate. On the question of extending the VAT base he did not go quite that far, sticking instead to the 'no plans' formula. In the process he ensured that those words can never again be uttered without provoking a hollow laugh.

The Tories have been here before. In 1979 they promised during the election campaign not to double the VAT rate, then increased it from 8 per cent to 15 per cent in the first Budget of the Thatcher administration. But then the party's manifesto had contained a promise, wholly absent from its 1992 counterpart, of a switch from direct to indirect taxation.

However, the turbulence in Tory ranks caused by the imposition of VAT on fuel should not be exaggerated. Mr Lamont believes that the reduction in tax credits on dividends and the fresh curbs on company cars mean that the Budget is much fairer than his critics contend. True, the tabloid reception for the Budget was almost uniformly bad and it is unlikely to help the Tories win the Newbury by-election. It is also true that a disproportionately high burden of the two biggest revenue raisers - VAT on fuel and the increase in National Insurance - falls on people in low- income groups. But it will not be lost on the more cynical of Tory backbenchers that these groups contain a high proportion of Labour voters and that the political damage can be contained.

There are MPs - and some ministers - on both the right and left who would have preferred to get some of the tax increases over with this year. Some young turks would prefer deeper spending cuts. The handling of proposals to increase social security payments to cover higher heating bills has hardly been a triumph of presentation. But an Independent on Sunday survey of Tory backbenchers (reported on page 2) suggests that the Budget has been generally well received by the mainstream of the party. This may simply be because Mr Lamont - thanks to a formula described by one minister as 'vinegar tomorrow' - is seen as having protected the recovery and promised an attack on the deficit.

(It is a tribute to the effectiveness of pre-Budget secrecy - now under attack from some of the Chancellor's senior Cabinet colleagues as an absurd anachronism - that Mr Lamont decided on the delayed tax increases and other key strategies at Chevening in January and there were no leaks. The first most of his colleagues knew about it was when they were told on Tuesday morning.)

Finally, even the mind-numbing complexities of Advance Corporation Tax can't detract from the welcome the Budget has received from industry. The expansion of export credit is the most tangible evidence yet of Mr Major's much discussed commitment to manufacturing.

Mr Lamont may therefore have saved his job for the time being. However the question of a Cabinet reshuffle remains shrouded in uncertainty. Mr Major would no doubt like to change some faces, as many in his Cabinet, only a year after an election victory, look tetchy, unconfident and battle weary. On the other hand, there is no huge queue of potential promotees. Baroness Blatch, a close friend of the Prime Minister, is often mentioned. Stephen Dorrell from the left and John Redwood from the right, both still in their thirties, are the most frequently canvassed names. But another view is gaining currency: that the average age of the Cabinet is already abnormally young at 53. So slightly older heads such as Sir George Young from the left and Jonathan Aitken from the Eurosceptic right, whose arms sales negotiations are judged a success at the MoD, might also be candidates. Both are in their early fifties.

According to one account of a recent dinner attended by Baroness Thatcher, the former prime minister caustically remarked that the only ministers who were doing well were Mr Aitken and Nicholas Soames, the larger-than-life Agriculture minister, adding after a theatrical pause: 'And who would ever have thought that?'

But two factors are making the reshuffle calculations unusually difficult. The first is whether Mr Major has the stomach for two large-scale Cabinet reshuffles - one this summer and another in 1994, the earliest date at which Douglas Hurd is expected to want to bow out. The second and more important is whether he will have the opportunity to do it this year without adding to the strife within the Tory party. For dark clouds continue to overshadow a party still at war with itself. Maastricht remains a minefield; the latest fear in ministerial ranks is that the Government could be exposed to a judicial review if the rebels challenge the Attorney General's opinion that the treaty can be ratified even if Labour's notorious social chapter amendment is passed.

The idea of using a referendum as the ultimate solution has been discussed - if only in whispers - but, so far, rejected. It would be an all or nothing gamble and defeat might mean the end for Mr Major. The treaty continues to gnaw away at the Government's confidence. A legislative programme is being assembled for the next parliamentary session, consisting almost entirely of Bills which can be relied on to unite the party. And concerted efforts are being made to dampen down the expectations of would- be rebels on the deeply fraught coal issue.

In such a context the Budget seems almost a distraction. Yet both the main political parties already regard it as the most significant event, in the long term, since the general election. Mr Lamont believes that he has laid the basis for the sustained recovery which will lead the Tories to a fifth election victory. Labour believes that the total tax burden will rise between now and 1997 and that this, and not the mere level of income tax, will be central to the next general election. In other words, that the Tories' tax spell has been broken and that they will never be able to challenge Labour on the same grounds again. In the short term, the Budget may be quickly forgotten. In the long term, it could well determine the outcome of the next election.

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