Brown benefits from Blair’s pushing

Published on Thursday 18 April 2002 01:00

Analysis

WHEN the Chancellor sat down yesterday, it marked the end of a two-year battle with the Prime Minister. When Mr Brown announced the 109 billion spending goal, Tony Blair was being hailed as the victor.

Downing Street painted this as a victory for Labour and Britain, but Kremlinologists who track the Blair/Brown relationship say yesterday’s Budget marked the end of an era - and one of the most ferocious battles in Whitehall.

The health spending war, as it is known by Whitehall, started on Sir David Frost’s sofa in January 2000. A reclining Prime Minister promised Sir David that health spending would reach the European average within six years.

Mr Blair’s almost insouciant remarks disguised an astute piece of politicking. His promise was calculated to bounce his prudent Chancellor into committing extra investment into the public services.

The Prime Minister had, for a long time, wanted a dramatic transfusion of funds into the NHS but had met opposition from a Chancellor guarding his purse strings zealously.

When Mr Brown saw the Prime Minister make this European average promise, his response was volcanic - and recorded by Andrew Rawnsley in his book Servants of the People. "You’ve stolen my bloody Budget," he told the Prime Minister.

This was exactly what Mr Blair had in mind. So HM Treasury set up a defensive mechanism. This was the Wanless Report. It was more or less unprecedented for the Treasury to set up a specific, long-running inquiry into the affairs of another government department.

It seemed at the time that Wanless would have two tasks: to approve the NHS as the only model of health funding that works for Britain, and produce modest estimates for its budget needs. The Comprehensive Spending Review in 2000 saw the Chancellor lose round one. Entitled Prudent for a Purpose, it triggered a generous release of cash for England’s NHS - 6.3 per cent growth over three years.

The UK’s health spending was to jump from 41 billion in 1997 to 66 billion in 2003. This was rapid change - and change which has now been eclipsed by an even more generous settlement until 2007-08.

Last year, Downing Street and the Department of Health noticed a change of heart by the Chancellor. His critics say he detected the way the wind was blowing - and decided that if he couldn’t beat them, he would lead them.

His speech to the Labour Party Conference in September, hinted at tax rises for health spending. Two months later, when he laid out his pre-Budget report, the hints became stronger. He coupled the announcement with the first Wanless Report - and seemed to be bracing Britain for tax rises.

His critics detected a double-bluff. It is classic Brown tactics to talk up the prospect of a large tax rise, to try to engender relief when he delivers a small one.

But after the death of his baby daughter, Jennifer Jane, the Chancellor’s tune changed. He spoke openly about how the experience left him convinced about the need to invest properly in the NHS - and, this time, even his critics believed him.

The final blow in the health-care wars was, however, dealt by the Prime Minister. The BBC held a special NHS day, and its highlight was an interview with Mr Blair. The interview has been repeated with mirth in Westminster bars ever since. Nicky Campbell, the presenter, had a list of questions and seemed not to notice when the Prime Minister effectively said tax rises will be needed to pay for more health.

When Campbell failed to pursue this area, the Prime Minister had to bring it up again, unprompted, to ensure he had the message. The day after, there was jubilation in Labour’s tax-raising camp. One e-mail circulating was entitled "Denis Healey lives" and had the text: "What was that about ‘pips’, ‘rich’, ‘tax’ and ‘squeak’?"

During the last two weeks, the game was over - but the negotiations between the Treasury, the Department of Health and Downing Street remained tortuous. The Chancellor was said to be in a foul mood, occasionally snapping at the Prime Minister and running through proposals like a lecturer - making clear he was not open to suggestions.

In the end, it was Mr Blair, empowered by his election victory, who won the most significant power struggle since the twin titans of New Labour had clashed over who should succeed John Smith in 1994.

Yet it is Mr Brown who emerged with the last laugh. As he sat down yesterday, Labour backbenchers waved their order papers with glee. For many on the government benches, the Chancellor had delivered an old Labour Budget, taxing the rich to spend on the poor.

It was a move which is unlikely to be forgotten should Mr Brown, always regarded as the conscience of the movement, decide to run for the leadership.

But squaring your own party will prove easier than winning the political battle. The decision to impose up-front tax rises to pay for improvements in public services constitutes the biggest gamble undertaken by Mr Blair since he challenged his own party to drop Clause Four.

It is a thoroughly revisionist move, exposing Labour to accusations that it is inherently, despite the spin and name change, a tax-and-spend party.

It is also a gift to the Conservatives, who are are happy for the government to revisit 1992, the last time Labour attempted to convince the electorate of the merits of high taxation - leading to a John Major victory.

But Mr Blair believes the electorate, particularly the middle classes, have been sufficiently convinced by Labour’s record since 1997 to accept that neither he nor Mr Brown would do anything to wreck their own economic achievements.

Moreover, there is a belief in Downing Street that the public is less enamoured with the concept that low-tax economies can solve all a nation’s ills. The demise of Railtrack can be held up by Labour as examples of how the Thatcherite free market can, and has, failed.

To guarantee a third term, however, the Prime Minister’s judgment needs to be spot-on.