The government is moving into its strongest, most confident phase. In the early days it appeared much more confident than it really was. But since the cathartic trauma of Christmas, new Labour has been calmer and more mature. This remains the most cautious government of recent times, but now it is confident, even, in its caution.
So this week Gordon Brown presented a cautious Budget with a rediscovered flamboyant confidence. Or, to put it another way, the confident, stylish delivery helped to disguise the caution. For this was a mid-term Budget presented with manufacturing in recession and the rest of the economy perilously close to it. What is more, the local and Euro elections are in the government's sights - a daunting prospect for an administration driven by the need to win elections (see "By-election Watch" on page 26). The presentation and to some extent the substance of this Budget were shaped with votes in mind.
The Chancellor, then, was more hemmed in than he seemed, politically and economically. Behind the glittering presentation he gave us an almost neutral Budget. The cut in the basic rate of income tax does not take effect until next year, thereby giving the government the double whammy of glowing headlines now, and again in 12 months' time when the measure is implemented. How much more politically astute than the reverse double whammy engineered by Norman Lamont when he was chancellor: he announced a tax increase in advance. Let us not forget that, for the next year, Brown still collects income tax, and we still pay it, at the existing basic rate. There was no daring taxation of child benefit, although the replacement of the married couples' tax allowance with the child tax credit has effectively introduced a new, taxable child benefit. Public spending, too, remains stable. The "extra" money for health and education came out of cash allocated and announced already.
But within these constraints Brown sparkled. Rather like the rock star David Bowie in his prime, Brown changes his public image to keep one step ahead of his audience. From the witty star of Labour's front bench in the late 1980s he became, in 1992, the dour iron shadow chancellor with one relentlessly forbidding message: Labour was no longer the party of tax and spend. The five years in which he proclaimed this uninspiring but necessary mantra must rank as one of the most disciplined performances by a senior politician. For Brown always had a wider agenda (and for the Labour Party a more exciting one as well), which had to be kept under wraps for electoral reasons.
Brown's latest, more relaxed incarnation came into being when he announced the public spending plans for education and health last summer. This was the equivalent of Bowie moving from his grey, melancholic Low period and saying "Let's Dance". For Brown, it was the moment of liberation. Since then, some of his private wit has been on display again as well. His previous Budgets have been delivered in a hurried, humourless manner, as if he was running around the track, wanting to get out of the stadium as soon as possible. Like Ken Clarke, he has always joked that his economic policies were "well within the Maastricht criteria", but this time his Budget speech was sprinkled with lots of other teases as well. He looked as if he was enjoying himself. Probably he was, as the Chancellor's latest public persona reflects more fully what he is all about.
He is driven by three work-related criteria: encouraging people to train and find work; making work pay; and helping those genuinely "incapable" of work. The Budget's measures focused most on the second of those criteria, making work pay. The main beneficiaries of this week's measures will be those on low incomes, the "working poor". Their incomes will be a little higher, partly because of the much talked-about "taxation by stealth", which has become the Chancellor's stock in trade.
This is the most interesting side of the Chancellor's latest image. For obvious reasons, there was no talk whatsoever of taxation by stealth before the election. Only the popular tax on the privatised utilities was proclaimed publicly. Since the election, Brown has found all kinds of subtle and painless ways in which he can redistribute modestly without voters really noticing, from the phasing out of mortgage tax relief to increases in national insurance contributions. Brown has been a taxer by stealth, not only to make his reforms palatable to Middle England, but to get them through Downing Street as well.
There is, though, one problem. The notion of taxing by stealth becomes a contradiction in terms when a chancellor's reputation has become that of a taxer by stealth. Similarly, Harold Wilson's profiles always stressed his deviousness. But how could Wilson be so devious when everyone knew he was devious? And how can Brown continue to tax by stealth when everyone knows him as the Chancellor who has discovered all these "hidden taxes", another misleading phrase now that they are being talked about incessantly?
In this context it was clearly a short-term masterstroke to cut the basic rate of tax. Tory chancellors pulled the same trick as a diversionary tactic to disguise a rise in the overall burden of tax. But in the longer term, the announcement leaves income tax, the most progressive and least complicated of all taxes, even more untouchable than before. There will come a time when the government needs to raise money and when taxation by stealth has reached its practical and political limits. Over a relatively short period, Brown has changed miraculously the terms of the desperately narrow political debate about tax, but I think he will come to regret pulling this particular rabbit out of his hat.
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