Dear Tony, please raise our taxes

The weeks leading up to Labour's thousandth day in power have produced some terrible headlines for the government. The frenzied reaction of ministers and spinners, behaving as if they were 30 points behind in the polls, have made matters worse.

If only they would all relax a little, instead of working on the assumption that a catastrophic electoral defeat is just around the corner. The political ground has indeed shifted in the first month of the new century. But it has shifted in favour of the very ministers being battered around by newspapers. For the first time in living memory, a Labour government is being berated for not spending enough. In the 1970s, the Wilson/Callaghan government was attacked from its own side when the IMF moved in, but there were no editorials in the Sun and the Mail urging the then chancellor, Dennis Healey, to be more generous with taxpayers' money.

Yet that has been the theme of recent days. Each morning, we read emotive news stories. The navy has no ships, and the soldiers no guns (at least none that work). The hospitals have no beds. Police stations are closed at night. Trains do not run on time, if they run at all. Schools and colleges have yet to contrive a tear-jerking story. But one university vice-chancellor jokes that perhaps he should turn the radiators off, so that students have to go home to their parents to keep warm. David Blunkett would probably be grateful. Every minister needs some extra ammunition in the next public-spending round, now that the health service has apparently scored a bull's-eye with Tony Blair's proposal to bring its spending, as a percentage of GDP, up to the European Union average.

I have re-read Blair's interview with Sir David Frost and it is pretty clear to me that he is indeed committed to a vast injection of cash into the NHS. The debate over whether this is a pledge or an aspiration is a red herring. In the interview itself, Blair made it clear that the additional spending was dependent on economic growth. Apparently, this was later spun mistakenly to the media as a "pledge", as foolhardy a term as the Tories' "tax guarantee", because public spending and taxation levels are inevitably linked to the performance of the economy.

But the economy looks set to be healthy for the next few years, so Blair will be under huge pressure to deliver the cash. That is why Geoff Hoon will not mind if there are newspaper stories about the dire state of the army, Jack Straw will be relaxed about headlines highlighting the shortage of police officers and David Blunkett won't be too unhappy about reports of teacher shortages.

The main accusation against the government is that, on the public services, it promised much and has delivered little. That is not the case. It never promised very much. During the 1997 election, Labour leaders argued that Britain was in a state of total disrepair and that they planned to change the ashtrays. They never promised a huge injection of money and, indeed, were fearful of speaking about even the small amounts of money they were planning to invest immediately after the election.

Blair and Gordon Brown argued that the new dividing line was between "fair taxation and unfair taxation" and between "productive spending" and spending that arose from failed economic policies, ie, those introduced by the Tories. These were mere slogans, which were fleshed out with minimal detail. So Labour would cut VAT on fuel, an example of "unfair taxation". It would tax privatised utilities and spend the money on getting young people into work, an example of fair taxation and productive spending.

It beggars belief that Labour leaders otherwise got away with their slogans on tax and spending without much greater probing. But no one can fairly accuse them of making precise, false promises. It was the dramatic election result, rather than the campaign, that changed the political atmosphere and raised expectations. The landslide created an illusion that a heady revolution had taken place, but a revolution had never been on offer.

Since coming into power, the Chancellor has imposed his "stealth" taxes, but he is running out of those and being famous for taxing by stealth soon becomes an untenable contradiction in terms. The closest that Blair has come to defining a position came in an interview with the Independent in September 1998, when he portrayed himself as a tax-cutter who was tough on public spending. He said that income-tax levels for some earners would fall and that any rise in public spending should be financed "in more imaginative ways", such as public/private initiatives. "That is the way the world is going," he added, as if there was nothing much he could do about it. Although he would phrase it differently in today's climate, I suspect that remains broadly his view. As far as I can tell, that is Brown's view, too. Certainly the Chancellor does not believe that recent weeks have seen a substantial mood change in favour of higher taxation to pay for public services. He would prefer everyone to focus on the increases in spending that he has already announced.

Both Brown and Blair underestimate their own success in securing the voters' trust. But events, or the dire state of public services, are forcing their hand. This will not be as traumatic for their iron souls as it may seem. Unemployment is low, tax revenues are high. Public-spending rounds really become dreadful only when the economy is heading downwards.

But the bigger political picture is this: before the 1997 election, Labour was too scared to admit that it would spend money, even when it planned to do so. Now all and sundry are calling for more spending. The tax-and-spend debate that lost Labour four elections has been turned on its head. In that sense, January has been a good month for the government.

This article first appeared in the 31 January 2000 issue of the New Statesman, Why arms sales are bad for Britain