Within an hour of Gordon Brown delivering his Budget speech last year, Saddam Hussein was toppled from his plinth. The war was “won”. Tony Blair was enjoined by some of those around him to capitalise on the “Baghdad bounce” by offering his rival a job he could not possibly accept, such as Foreign Secretary. The Chancellor might still have a purpose – power – but, the Blairites whispered, where was his prudence? Borrowing was out of control, spending was spiralling and tax revenues were stagnant. To compound the problem, there he was making growth predictions that defied logic. Meanwhile, Blair was leading the free world. Even some close to Brown confessed to nerves.
The Brown 2004 model is more sanguine. That is not to say he is more relaxed. That would go against character. He might still be waiting for the big prize, but he is back in his accustomed position – in overall charge of domestic policy which, he wryly acknowledges, is being juxtaposed with someone else’s foreign policy.
The Chancellor’s one foray into humour was not quite as innocent as it seemed. His mock apology to the House for misleading it – he had been wrong to claim that Britain was enjoying the longest period of sustained economic growth for more than 100 years, as the actual figure was more than 200 years – might have reminded MPs that the man sitting next to him, the Prime Minister, had yet to show contrition for getting his own facts wrong on weapons of mass destruction.
Perhaps more than any other, Brown’s eighth Budget showed how far the Labour government has, and has not, shifted the economic debate. While the rate of growth in government spending on public services will slow markedly in the next period, the principle has been established. All the political parties are convinced that increases in health and education budgets are as much an accepted part of the voter’s psyche today as the desirability of tax cuts was in the 1990s.
By announcing 40,000 civil service job cuts, which he hopes will help produce a windfall of £20bn (a huge find), Brown leapfrogged the “big ideas” of the other two parties to uncover more cash. The main difference, according to senior Treasury officials, is whether these savings “are allocated to front-line services or to tax cuts”.
Labour will accuse the Tories of wanting to slash spending. The Tories will accuse Labour of irresponsible spending. The differences on fiscal policy will not be as great as portrayed. Brown, I am told, is moving reluctantly, as he did last time, to Blair’s position on income tax. Labour is almost certain to go into the next general election campaign making a third successive pledge not to increase the basic or top rate. The Brownites point out that the war in Iraq has not only damaged Blair personally, but it has set back, perhaps for years, any hope the government might have had for setting a more radically redistributive agenda on the home front. Blame the media, blame ministers, blame whoever, but the Treasury appears to have convinced itself that public tolerance of tax increases has peaked – at least for the foreseeable future.
The public spending argument may have been won (and many people’s individual experiences of the National Health Service seem more favourable than the national picture), but the tax argument has not. Eventually, as both the Conservatives and Liberal Democrats have pointed out, something will have to give. Michael Howard identified the most glaring weak spot, the forecast that public borrowing will reach £37.5bn, adding that “the country will pay for it later in Labour’s third-term tax rises”. Brown is prepared to confront that if, or when, it happens, confident that he might get away with it yet.
The Chancellor is guided by a second, but by no means secondary, political necessity. No matter how he and the PM finesse the succession question during the election campaign, he is mindful that the Tories are preparing the mantra – you might vote for Blair, but what you’ll get is Brown. He is keen to challenge the conventional wisdom that he will scare off the floating voters that Blair so assiduously courted. He does not want to be seen as the Jim Callaghan of the new era, the man who inherited office, only to hand it to the opposing party at the electoral test. Hence all the talk now of “stability” and “investment” – a safe synonym for spending.
In a speech lasting close to an hour, Brown devoted barely a minute to one of the most important issues of our time. He not only postponed a further assessment of the case for euro membership, but he trampled on any lingering hopes that some in his party might have had. The perfunctory promise to review progress in next year’s Budget was accompanied by a litany of statistics showing how poorly the eurozone economies have performed, how misguided the Stability and Growth Pact has been, and how convergence between the British and Continental economies is further away than ever. In shutting off the option so disdainfully, Brown was proving a point not just to Blair, but to Howard: the Chancellor does not want the issue of Europe to play anything more than rhetorically at the election.
Brown is now in a holding pattern. He sees how Blair has survived everything that has been thrown at him on Iraq. He surveys a government desperate to regain the initiative but lacking the confidence or ideas to do so. Brown has entered the third and final phase of his chancellorship. First came the big surprises in the first term (Bank of England independence and other razzmatazz), then came the big spending of the past few years. Now comes the not-so-big consolidation. His authority is immeasurably greater than it was in 2003, but he is still waiting to translate that into ultimate power.
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