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Donald Macintyre: Chancellor has the political ammunition to defend tax increases

Wednesday 28 November 2001 01:00 GMT
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For the best part of nine years, Labour has been trying to move out of the shadow of having been fatally depicted as the irresponsibly high tax party in the four elections it lost since it was last in office.

Yesterday's pre-Budget report by Gordon Brown was the surest sign yet that it believes it has not only succeeded but can now move on. For the unashamed, unmistakeable, implication of the statement is that it is now, at last, ready to commit to higher taxes and it is confident it will no longer have to pay a fatal electoral price for doing so. Expect the first of those tax rises in next March's budget.

Of course, this was a distinctively Labour statement, both in its commitment on a public-funded NHS and the help for pensioners. But that hardly does it justice. In preparation of his calculated gamble, Gordon Brown showed yet again how he is – among many other things – a highly political Chancellor. For the report on the NHS that will make Derek Wanless, the former chief executive of NatWest a household name is nothing if not a remarkable tactical coup by Mr Brown. At first sight it looks a remarkably solid piece of work, not least in the way it mercilessly exposes the deficiencies of British health service resources and performance compared with its international counterparts.

What was unexpected about it, however, was its unequivocal finding that the British system of a tax-funded NHS is, in Mr Brown's words yesterday "the fairest and most efficient system for this country."

There is something in the barb thrown at Mr Brown yesterday by Michael Howard, the first shadow Chancellor since 1997 who does not look as if he is petrified of his opponent. Mr Howard remarked of the Wanless inquiry that "if you ask a Labour question you get a Labour answer." Neverthless, the report promises to be an Exocet at the Government's disposal in the coming debate between the parties on the future of the NHS.

On the one hand, it provides it with ammunition that it was always going to need in the last two years of this parliament to justify the tax rises it would have to impose to maintain the current growth of spending, let alone actually increase it.

On the other, it makes it correspondingly more difficult for the opposition to argue that radical changes in funding towards more private care are necessary to rescue the NHS.

Beside this highly important turning point in New Labour history, the other elements of the budget – and the arguments which preceded them – seemed less significant than they no doubt are.

The specifics and scale of the pensioners' credit were not anticipated. The decision to pilot new training and research credits sought by the CBI and the TUC reflect a fierce debate in Whitehall over whether this is, in fact, the most productive use of the taxpayers' money. And there still may be an argument between now and the Budget over the size of the child tax credits, which Mr Brown believes are crucial to lifting families out of poverty and into productive work but which some spending ministers persist in believing are granted at the expense of what they see as more productive cash on essential services.

Even on the NHS there may be arguments in some quarters outside the Treasury that limited charging – say for hotel services in hospital – may be needed to augment extra taxation.

Was Mr Brown teasing MPs on his caution over the euro when, taking justifiable credit for fact that the Bank of England's remit had made it possible for it to continue cutting interest rates in an increasingly difficult global economic climate, he laid emphasis on the fact that it has a duty to help growth as well as combat inflation? Perhaps. These are just the characteristics he is know to lament are lacking in the European Central Bank.

But, in the end, none of this mattered much beside the momentous fact that the Government as a whole, Prime Minister as well as Chancellor, are now ready first to debate in public and then to justify, higher taxation to pay for public services that are so painfully lagging behind those of its principal competitors.

It appears to have accepted, at long last, a large part of the argument that if you want the best European standards of public services, you may have to move towards more European levels of taxation to pay for them.

Emboldened, at last, by two election victories fought with nervous defensiveness on the subject of taxation, Labour finally seems ready to confont the implications.

The jibe before the 2001 election was that it was prepared to talk about spending but not about the tax needed to pay for it. This time it will be asking the public if they are prepared to pay for the world class public services it says it wants. And it was clear, after Mr Brown's confident performance yesterday, that it believes the answer will be yes.

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