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21 March 2007

Is Brown beginning to look leaden footed?

Tory A-lister Kwasi Kwarteng gives his response to Gordon Brown's final budget which he sees as rath

By Kwasi Kwarteng

This week the iron chancellor became Stalin, the man of steel. His budget today, however, has shown more ingenuity and finesse than this new nickname implies. First of all, it is a clever budget which you would expect from a man who has certainly had plenty of practice: apart from the utterly obscure Nicholas Vansittart, Chancellor from 1812 to 1823, no one has spent ten consecutive years at No. 11.

So, coupled with experience, you would expect the usual Brownian trickery and sleight of hand. This year, the Chancellor has not disappointed. The 2p cut in the basic rate of income tax will grab the headlines, but the £2.6bn in National Insurance over two years will be left out. The lower tax rate has now been moved from 10p to 20p.

Brown boasts of his relationship with Prudence, but is not embarrassed by increased government borrowing. Gordon Brown increased borrowing again by £8bn over the next five years. The borrowing, as every economist knows, will eventually be paid for by more taxation.

The stance on education was also revealing. Tony Blair famously said “education, education, education” would be the three most important things in his administration. This year Gordon has turned his back on all of that. Education spending will grow at 2.5%, lower than the growth of the economy, and lower than the 5.3% under Labour’s spending reviews to date.

The budget, in actual fact, is quite an austere one. Brown is not a fool. He realises more clearly than anyone the need for a little restraint. After the spending spree since 2001, when Tony Blair made the most important spending commitments of his premiership on the Frost programme, the public finances need to be held in check.

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Blair in 2001 committed billions to the NHS on television. The money came but, without any fundamental reform, progress has been slow. Not being remotely interested in economics, Blair has left Gordon to deal with the consequences. Gordon now realises that the dramatic hike in spending has to come to an end. The country couldn’t sustain the increases in public spending without big hikes in taxes or much greater borrowing.

Brown accepts this but he had to go with a bang. It’s his last budget, after all. He needed a big party to end his decade-long chancellorship. He also wanted a housewarming party for his entry to No 10. So he has dressed up quite a tight budget – which is reducing spending commitments on things like education and raising taxes slightly – as an act of great generosity.

It may take time for people to see through this. To make things simple, though, just look at two figures; the government’s tax take from last year and this year’s figure. Last year the figure was £516bn, this year the figure is £553bn. These are large figures, but I can tell you that this year’s figure is 7.2% higher than last year’s. This is higher than any inflation figure (abt. 3%) I have seen. It is also much higher than the UK economy’s growth rate which, even if you include inflation, is lower than 7%. The Brown state continues, like the universe, to expand.

Interestingly, the budget announces an increase in car vehicle excise duty to £400 for “4 by 4” cars. Brown’s belated nod to the Green lobby just underlines the way in which Tory leader David Cameron is now leading the political agenda. Cameron is a politician who, as Churchill said of Joseph Chamberlain, “makes the weather”. Brown, the man of steel, is beginning to look quite leaden footed in comparison.

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