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EDITIONS
 Thursday, 4 April, 2002, 11:23 GMT 12:23 UK
A return to tax and spend?


Thanks to a careful softening up campaign, no-one will be surprised if Gordon Brown announces significant tax increases in his budget.

As the clamour for concrete, identifiable improvements in public services has intensified, so the chancellor and the prime minister have moved back on to familiar Old Labour territory.

And they appear to believe that, unlike previous Labour governments, this time they will get away with it without a major outcry.

There will be the inevitable claims that this is Labour returning to its old, tax and spend ways

Even the Tories have signalled that they would be prepared to at least forego tax cuts in order to put more money into the ailing health and education systems.

Election manifesto promises mean the chancellor cannot raise income tax levels or fiddle with VAT.

National insurance increase?

But, as he has shown in the past, there are plenty of other ways of bringing in more cash from taxpayers.

Probably most obvious is through national insurance - the option most regularly touted - although there are a host of less eye-catching indirect taxes he could target.

If he does increase the overall tax burden there will be the inevitable claims that this is Labour returning to its old, tax and spend ways.

Conservative Party leader Iain Duncan Smith
The Tories have signalled that they would forego tax cuts

However, the chancellor has already used previous budgets to increase the overall tax burden.

Ministers used to argue the toss over that, but now they will accept that the tax burden needed to rise in the early years of Labour to put investment into the public services.

Those are the same public services, of course, that the chancellor is saying now need taxation-funded increases in investment.

'Tax and spend'

The difference between the previous, almost clandestine tax increases and the looming ones, is presentation - New Labour's first weapon of choice.

The apparent change of heart offers the Tories a powerful weapon

In past budgets, Mr Brown was careful not to make too much of his tax hikes, fearing he would be accused of returning to the "bad old days" of tax and spend.

The difference now is that he and the prime minister are almost boasting about it.

It may be that they believe the public mood has changed and that voters now mean it when they say they are prepared to pay a bit extra to fund the public services.

And many, particularly on the left of the party, would be delighted if the recent consensus that taxes are only for cutting has finally been broken and they can go out and proclaim the conversion.

New Labour failure?

It is more likely, however, that the chancellor knows that, while he does not actually need the extra cash right now, he will need it in the following, pre-election years.

Best, then, to get it done now, put the best possible gloss on it, and risk any backlash before voters can wreak their revenge through the ballot box.

If disillusion with New Labour continues, the Old Labour tag could prove a distinct advantage

And, of course, the apparent change of heart offers the Tories a powerful weapon.

Iain Duncan Smith and his shadow ministers will be able to claim that it sends out one simple message - that the New Labour government has failed.

He will be able to claim that, by the government's own tests, it has failed to "save the NHS" or convince people that "education, education, education" has meant what it appeared to mean in 1997.

He will equally be able to claim that, while Labour's pre-election tax promises may only have applied to income tax levels, ministers happily allowed voters to believe they applied to all taxation.

Leadership battle

Meanwhile, Gordon Brown's apparent delight at being seen as Old Labour is simply explained.

One day, Labour MPs will have to choose a successor to Tony Blair and, if the current disillusion with New Labour continues, the Old Labour tag could prove a distinct advantage.

However, the backbenchers who are eager to believe that the chancellor is one of them - and will take any tax increases as evidence of that - are the same ones who bridled at his "budget for business" announced weeks before the main event.

They are the same ones who were up in arms at his 75p pension increase, his cuts to single parent benefits and even his very first act as chancellor, giving independence to the Bank of England.

The danger for Mr Brown is that those MPs see his Old Labour clothes simply as a way of disguising a New Labour chancellor who is, for the first time in five years, facing a serious challenge to his apparent invincibility.


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03 Apr 02 | Politics
03 Apr 02 | Politics
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