Streamlined pain and hardly any blood

THIS IS not an easy country for reformers. It is still a month before the first unified 'tax and spending' Budget is delivered and already the experiment is being widely written off as a sham or, if you prefer, a political disaster. But most of the arguments being levelled against one of the more important Whitehall changes of recent years are exaggerated and miss the point.

Putting the Budget, which raises taxes, together with the expenditure round, which expends them, was meant to discipline spending ministers. Timing was all: if you wanted to defend your patch (and even the most right-wing ministers do, as Peter Lilley may testify at Cabinet today), then you had to accept that your gain would result in higher taxes. You would be, in part, responsible for the dreadful headlines the Government received on the morning after Budget day.

The first signs from both the spending side and the Treasury is that this is working. Spending ministers I have spoken to are quite clear that they were negotiating their budgets in the full and grim knowledge of the general position facing Kenneth Clarke. They knew that 'winning well' in the spending round might quickly result in semi-public denunciation as the people responsible for the extension of VAT to babies' bootees.

As one said: 'I am aware very much of the general fiscal position. I haven't seen the books, those are quite properly for the Prime Minister, the Chancellor and the Chief Secretary. But I know the position and I think Ken has done very well because he has been pretty open.'

For that minister, and others, popularity won in the department for high spending would be bought at the price of unpopularity among parliamentary colleagues.

This atmosphere of trade-offs between tax and spending, against the background of a huge borrowing requirement, has been reinforced by the use of a seven-strong Cabinet committee, chaired by the Chancellor, which became the main focus for deciding spending priorities last year. This committee, EDX, set up in the wake of the decision to unify the Budget, enabled the Cabinet to agree most of the spending problems in just two sessions. It was working with up-to-date information about the general fiscal position - a grim message, reinforced in smaller meetings by the Prime Minister and Chancellor.

Every public spending round is heralded with bland routine as the worst since the Norman conquest; 'blood all over the floor, old boy - and on the ceilings, too' had a minor hyperbolic twist this year when we were promised blood would be seeping into the corridor, too.

Well, we waited and watched. With the exception of Malcolm Rifkind, who has taken heavy private criticism among colleagues for holding out so long on the defence budget, there has been little blood. The Cabinet is still pretty bitchy; right-wing ministers whinge about left-wingers, and vice versa. The old leaking and backstabbing game continues. But assuming that today's Cabinet meeting goes according to plan, this year's public spending round, though tight, has been concluded even more quickly than the Treasury expected. And for that some of the credit, at least, must go to the new arrangements.

Some ministers may complain that they ought to have had more opportunity to discuss the relative merits of this extension of VAT and that lowered threshold. But it is nave to expect a detailed conversation about tax options in the not-

entirely-private arena of full Cabinet. Nor, frankly, are most spending ministers remotely well briefed enough, or sometimes competent enough, for that job.

There is, of course, a price for this more logical approach to the national revenues. Under the old system, Parliament and its committees had three chances to debate and interrogate the Treasury: at the time of the old autumn statement on spending, a few months later with the publication of the public spending white paper and then at the old Budget time in the spring. That is now down to one - not enough - and there deserves to be a parliamentary row about it.

For the Treasury, on the other hand, the new regime has been an almost unalloyed good. Ministers are not exhausted by the combined Budget. There is, indeed, a chirpy atmosphere about. Mr Clarke has started to tear up the old dogmas on private and public spending to allow the possibility of more joint- funded capital programmes; his violation of some of the hallowed pre- Budget 'purdah' traditions has been equally brusque.

Most intriguingly of all, the Chancellor has exhibited no sign of concern as the campaign for the independence of the Bank of England has gathered momentum. He has not been overly enthusiastic in recent articles but both he and John Major have encouraged a debate. They are certainly getting one - most recently, the bank's deputy governor, Rupert Pennant-Rea, this week gave MPs further details of its thinking about how, not just whether, this could be achieved.

Around Whitehall there has been the odd raised eyebrow about how the Treasury will occupy itself for the rest of the year, once the great tax-and-spend flurry is over. One obvious job would be to conclude the bank debate, with Mr Clarke becoming the first Chancellor to espouse its independence while in office, rather than shortly after leaving it. Bank independence is no anti-inflationary panacea - the Bundesbank rests on a German consensus about sound money which Britain lacks - but it would help.

Freeing the bank would be a neat and useful match for the unified Budget. It might even give us a leaner Treasury fit for the late 20th century. This may seem a hopelessly radical thought for these difficult political days. But the Treasury is one of the few departments which seems, contrary to conventional wisdom, to have had rather a good autumn.