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EDITIONS
Tuesday, 27 November, 2001, 19:22 GMT
Labour's secret tax weapon
Chancellor Gordon Brown
Nyta Mann

Gordon Brown used his pre-Budget statement to unveil a new tax-raising device. Its name is Derek Wanless.

Mr Wanless, formerly of NatWest, is the man the chancellor commissioned 18 months ago to carry out a review of long-term funding needs of the NHS.


I believe that as we plan to make our Budget and spending decisions next year and to fulfil all our commitments to economic prosperity and social justice, it will be right to devote a significantly higher share of national income to the National Health Service

Gordon Brown
His interim report, 220 pages long and released simultaneously with Mr Brown's statement, concludes that a publicly funded tax-based service remains the best model for health provision.

He also concludes that the health service needs "significantly more long-term investment" if it is to meet the needs of the future.

No great surprise there, given he had been asked expressly to look at the issue in fairly well-defined terms by Mr Brown.

And needless to say the chancellor agreed with him, saying "it will be right to devote a significantly higher share of national income to the National Health Service".

Labour a victim of its own rhetoric

This was the sound of the chancellor kicking off the great public debate the government is keen to get under way on paying for improved public services.

Note, though, that the prime minister and the chancellor used a human shield in the form of a non-politician, the banker Mr Wanless, to open the debate.

Brown's growth forecast
2001: 2.25%
2002: 2% - 2.5%
2003: 2.75% - 3.25%
Neither Mr Blair nor Mr Brown wanted to be seen leading a call for tax rises themselves without the ground having been carefully prepared in advance.

The irony is that in the run-up to 1997 New Labour was so determined to convince the voters it was safe to let it back in charge of the economy and that it was no longer a "tax and spend" party, it is now something of a victim of its own success.

In his party's ruthless drive to win office Mr Blair did not say his government would not raise taxes of any form. But he did make a very big noise indeed of pledging not to raise income tax.

Not so stealthy

The sheer force of the party's rhetoric led people to believe there would be no tax rises, full stop - hence the political embarrassment when it was caught out raising "stealth" taxes instead.

When the tax rises expected in this parliament do come, attempting to hide them in the same way will not work. People are far more aware of them then they used to be - thanks in large part to Tory campaigning on the issue in recent years.

The result is that the government has to be bolder and more open about tax hikes it looks set to make further down the line.

A key part of the chancellor's strategy is that so long as the public is confident the money raised is being spent competently and on the things they wholeheartedly care about - health and education, but above all health - any electoral backlash will be minimal.

Optimistic pessimist

Those are the tactics. But will the sums support them? Mr Brown is a notoriously super-cautious, gloomy even, chancellor, at times painfully adhering to the self-imposed prudence that chafed terribly on spending departments for New Labour's first few years of office from 1997.

On Tuesday, however, we saw what looked in comparison to be wild optimism, with an economic forecast far rosier than many analysts were expecting - particularly given the increased severity of the global economic downturn following 11 September.

According to Mr Brown's figures, as far as the UK is concerned this is to be a very short slowdown, indeed little more than a blip.

If the figures turn bad on him, and with Labour pledged to increase health spending by 7% a year in real terms, the government will be in serious trouble - and Tuesday's pre-Budget report will come back to haunt him.

The government's pre-Budget report will be on 27 Novewmber


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27 Nov 01 | Business
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