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4 December 2006

Oh so different

Gordon Brown whispers to Labour's core supporters that he is determined to redistribute wealth. But

By Donald Hirsch

After all the waiting, will Gordon Brown prove he was worth waiting for? From the moment he enters No 10, he will have two or three years to show that he is not Tony Blair Mk II. To do so, he will need not just to restore trust in honest government, but to move the new Labour project on to new ground. In particular, he will have to find more effective ways of doing something Tony Blair once promised: to “redistribute power, wealth and opportunity” in Britain.

But does he have the courage?

Brown is, by instinct, a social reformer. His fervour for causes such as ending child poverty and getting more working-class children to university goes far deeper than Blair’s desire for a classless society where everyone has the opportunity to thrive on his or her merits. The big difference is that Brown has been willing to risk offending the middle classes once in a while, whether by championing reverse discrimination at Oxbridge or stealthily taxing the better-off to finance huge tax credits for the poor. But he has so far found it hard to engineer a decisive change, especially in social mobility.

As a prime minister in a hurry, Brown could start to play Robin Hood more convincingly than as a prudent chancellor. To do so, he would need to shake the political firmament in two dramatic ways: by putting explicit personal tax rises back on the agenda and by starting to persuade the middle classes that the best thing the government can do for them is to help the poor.

There will be no getting away from taxation as an issue. Brown as Chancellor managed to focus his Budgets on distributing billions – whether to services best navigated by the middle classes or to payments to poor families – rather than on where these billions were coming from. Many came from growth in incomes as well as the Chancellor’s wheeze of taxing more of these incomes by not raising tax thresholds proportionately: the ultimate stealth tax. In today’s tough er budgetary climate, this strategy has run out of steam. To find the further billions needed to maintain the momentum on child poverty, improve the health service, fund the pensions settlement and meet a host of other pressures, new sources of tax income will be needed.

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In 2002, Brown started to break the taboo against raising the rate of income tax by putting a penny on National Insurance contributions – which have become income tax in all but name. Nobody rioted, partly because of the explicit link made with necessary rises in health spending. In the next three years, the time may be right to extend this experiment. Again, he would have to link rises in tax or NI rates to clear justifications of where cash is needed.

The tone in which this case is made will be important. Tony Blair’s emphasis has been on getting the middle classes to “buy in” by appealing directly to their interests, with much talk about improving schools and hospitals and less about redistributing to the poor. Brown has colluded in this to a large extent, but he also talks of “progressive universalism”. This, unlike your average new Labour soundbite, is actually serious. It means giving something to everyone, but more to the worst-off. Facing an opposition leader who is being advised to adopt the language of “Polly Toynbee rather than Winston Churchill”, Brown has new options opening up for him. He is well placed to make the argument that measures to provide better life chances for children who grow up today in poverty and hopelessness would also improve life hugely for Middle England, by reducing the damage that disaffected young people are causing. Disruption on our streets and in our schools is at the core of the “feel-bad” factors that matter most to voters.

Blair has not been slow to talk about the damage that social exclusion causes to society, but his style has been to emphasise clever-sounding, small solutions. The latest announcement, a fund to provide “supernannies” to help in adequate parents become better at parenting, is designed to persuade middle-class voters that the government is about to sort out the family down the road whose 12-year-old is running wild, just as happens in the TV programme. It will cost a minute £4m nationally.

Brown’s schemes tend to have about three more zeros. On 6 December in his pre-Budget report, he will have to start confronting the need to push policies to reduce child poverty, which, as calculated in my report for the Joseph Rowntree Foundation, will cost the government £4bn to halve by 2010. This starkly illustrates the contrast between the two men’s personalities. Blair likes neat solutions, and emphasises reforms crea ting mechanisms and incentives to make the state more effective at solving social problems. Brown is no stranger to clever little initiatives or to fiddling with incentives: the 45 individual policy decisions announced in his most recent Budget ranged from £10m to extend tax relief on film-making to £5m towards increasing skills coaching pilots for women. But he apparently accepts that the country needs big economic changes to help people at the bottom of the pile, not just lessons in behaviour.

He also accepts that improving poor people’s lives is not simply a matter of income redistribution. In his Budget speech in March, he made the case for ensuring that the kind of education that the rich can afford should be more widely spread, by aiming in the long term to spend as much per pupil in state as in private education. This is still a utop ian dream, but putting substantial additional resources into improving outcomes for disadvantaged children would be an important start.

So far, the Robin Hood principle has barely been applied to main stream funding for schools. Most of it has been distributed by local authorities according to formulae that give equal weight to every student, regardless of background. Local authorities with more poor children get more from central government, but within each authority, a privileged suburban school gets more or less the same as one where most children are from broken homes or have parents who are not native English speakers. Yet it is more expensive to educate the latter, both because they need more intensive help and because it is often harder to recruit good teachers who can cope with the conditions in their schools.

Recently, the Department for Education and Skills has quietly dropped the requirement to base school funding on pupil headcounts. This was first brought in by the Tories, but the DfES under Alan Johnson is now encouraging local authorities to weight funding more to deprived schools. The problem is that there is also a guarantee that each school will maintain its current level of resourcing, so this change could be made only if schools are given a large extra dose of funding in next summer’s spending review. So an early question for Brown as PM, and perhaps Johnson as his deputy, will be whether he can pull off and sell an expansion in schools funding that is more concentrated than previously on raising standards for the poorest children.

Brown’s radical instincts are extending beyond the broad economic remit that he garnered for himself a decade ago, and into new realms of politics. His recent speeches make just as much of his belief that power should be redistributed, away from the centre. He has gone so far as to argue that this encapsulates Britishness: “The British way is to break up centralised institutions that are too remote and insensitive and so devolve power . . . to restore and enhance local initiative and mutual responsibility.”

Will a man known for his control freakery willingly relinquish power from the centre of government at the very moment when he arrives there? The delegating and interfering sides of Brown’s character will compete for prominence. Blair’s centralising tendencies have been heavily influenced by his own self-belief, combined with his lack of confidence in others to improve public services if left to their own devices, and most particularly his disdain for local government. Brown shares the self-belief, but not the disdain. People to whom I have talked from both men’s camps agree on this difference.

The first “Brown as prime minister” policy to have been trailed heavily is symbolic of this relinquishing of central power: “independence” for the National Health Service, supposedly equivalent to that of the Bank of England. In reality, this is an oversimplistic notion. The Bank could be given operational freedom at a stroke because it was straightforward to set it a single objective: the control of inflation, for which it is held strictly accountable. Outcomes in the NHS are not only far more complex, but also less precisely controllable, given the levers that can be pulled each month by a managing board. Yet while these would make autonomy for the NHS far messier in practice, a move in this direction could become the next step along a road that Brown and his supporters hope could transform the way in which services are delivered.

In the struggle between Brown the enabler and Brown the controller, the big trap will be to give public bodies freedom and then set them such detailed targets that they have little real power to exercise it. In agreeing targets with Whitehall and local government, he has already learned to restrain the controlling urge by cutting back on the hundreds of agreements and targets that were initially set. But local government still feels its priorities are being dictated by the centre to a much greater degree than elsewhere in Europe. At the heart of this is, again, money: councils feel emasculated because they can raise only a quarter of their spending themselves.

A bolder shade of Brown

Another early challenge for Brown, therefore, will be reforming the council tax, currently under review by the Lyons inquiry into local government, which is likely to report early next year. Even if it does not propose a local income tax (which it has not ruled out), this review is likely to force central government to face up to the inconsistency of telling local government to take responsibility, but constantly tying its hands financially. How Brown responds to its recommendations will give a good early indication of how bold he is willing to be as prime minister. If he really wants to act on his devolutionary instincts, he will give councils more control over their finances. And if he really wants to act on his progressive instincts, he will contemplate a fairer local tax system than the council tax, widely seen as iniquitous.

For the longer term, much more radical ideas for increasing autonomy from central government are being hatched by Brown’s allies. One that is tentatively being raised in private is that the Lords should be changed into a House of Standards, a body through which scrutiny of public bodies would be channelled. Bodies such as the Audit Commission and the various inspectorates would report to this second chamber, allowing parliament and ministers to see if those who deliver services were fulfilling their mission without requiring day-to-day interference in their running. Such a fundamental constitutional change would be a brave move indeed, and almost certainly too big for a first Brown term. But the thinking behind it represents something important about Brown’s political persona, similar to the granting of independence to the Bank of England. An inveterate meddler, he is inclined to protect organisations from his own meddling.

A minority view among Labour supporters is that Brown’s long wait for Blair to step aside has been worthwhile, because there will now be just enough time before the next election for voters to fall in love with him, but not enough time for them to fall out of love.

Whether that happens will depend largely on which side of his personality he shows them: not just in his style, but in his actions. An emollient Brown relying on a broad smile and steady-as-she-goes policies designed to avoid offending Middle England seems unlikely to work: both Blair and Cameron do this act better. A bold Brown willing to rock the boat with truly innovative changes to the economic and political balance of power in Britain would face big risks – not least from the media, which will be eager to pounce on the faintest whiff of old-style “tax and spend”. But it would be more in the man’s character. In any case, with the present version of the new Labour project clearly past its sell-by date in the minds of the electorate, there may be little to lose from taking the bold option.

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