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JOHN HUMPHRYS: Now it's the budget
next week, as if you didn't know and Gordon Brown will, no doubt, play
the prudent Chancellor again. It's a role he enjoys. And over the past
three years he's saved quite a lot for the government's piggy bank. Now
he's under great pressure from his own supporters to spend some of it.
But he's also under great pressure from his new friends in Britain's boardrooms
to cut the tax burden - and, as Paul Wilenius reports, he might have a
problem doing both.
PAUL WILENIUS: The Church - for centuries
it's given the nation moral guidance. And for some politicians it's helped
turn their trade into a crusade.
GORDON BROWN: Our prudence for a purpose
is hard earned and it is hard won and we will not sacrifice it for today's
standing ovations, tomorrow's headlines and next week's easy slogans or
next month's false solutions.
WILENIUS: Gordon Brown is a politician
of strong beliefs. He has high ideals of helping the poor, but thinks he
can only meet them if he's cautious and prudent. Indeed, he's set out to
prove that on taxes, spending and management of the economy the Labour
Government need take no lessons from the Conservatives As the son of a
Scottish Presbyterian Minister, Gordon Brown is steeped in the moral values
of the Church. As Chancellor he's portrayed himself as a financial puritan.
But in his forthcoming Budget and spending review he'll face real temptation
to spend much more on public services, testing his prudence to the limit.
Brown has made prudence his watchword. He's now courted by the businessmen
who once shunned Labour, making the Bank of England independent has broken
Labour's association with high inflation. Over the last three years he's
kept spending tight and direct taxes down. As a result he's gained the
trust of the financial community and the confidence of the electorate.
ANDREW DILNOT: I think people are increasingly
accepting that Gordon Brown really is a prudent Chancellor, we've public
finances improving. Admittedly they've been improving since 1993 but under
Gordon Brown's stewardship we've gone into surplus for the first time since
the 1980s.
KATE BARKER: The main way in which Gordon
Brown looks a lot more prudent than previous Labour Chancellors is that
he's been very successful in setting plans on public spending and sticking
to them. We haven't had public spending overruns, indeed if anything we've
had public spending under-runs, that's certainly gone a long way to making
business feel that we're in new territory with this Labour Government.
WILENIUS: The Protestant work ethic
is also at the heart of Brown's policy and his next Budget is set to follow
in the same direction. Building on his New Deal for young people, the
National Minimum Wage and working family tax credits he will do more for
those in work. But despite the 1p cut in income tax next month, for the
first time the purpose of his prudence is being seriously questioned.
He's facing accusations from the Tories that through stealth taxes the
overall tax burden is going up.
BARKER: The Government was clearly
very worried about the figures that were published a month or two ago showing
that the tax burden in the UK had been on the increase since Labour were
elected. But going into the election they'd clearly like to say: look,
over the last couple of years we haven't increased the tax burden any further
and that probably means, because if he does nothing on 21st of March
the tax burden will rise a little that he will look for ways to roll back
the burden of tax both on the consumer and I think on business.
DILNOT: I think the government
would very much like the tax burden to be falling by the end of this Parliament.
I think they're embarrassed by the fact that the tax burden has gone up,
they seem to be very nervous and twitchy whenever it's mentioned. There's
no way they can get the tax burden back down to the level it was at the
beginning of this Parliament without massive tax reductions that I think
are inconceivable.
1992 CONSERVATIVE PARTY ELECTION BROADCAST: Adding up the cost of all
the promises Labour have made to date, it comes to an astonishing �35 billion
extra a year.
WILENIUS: The devastating attacks
on Labour in the 1992 election campaign on tax have left their mark on
Brown. He doesn't want to be attacked for rising taxes before the next
election, which is now expected in spring of next year. But many in his
own party are opposed to more tax cuts which they believe are aimed at
Middle England as well as neutralising the Tory assault. Brown fears such
a move could leave Labour politically exposed.
DAVE PRENTIS: I would not be in favour
of tax cuts, there have been a number tax cuts over the years. As far
as we are concerned the economy is strong, there's no doubt about that,
the economy will remain strong over the next two to three years .
GILES RADICE MP: I don't think there will
be any big reductions in tax before the next election. We've already achieved
our 10p starting rate, we've had the reduction of 1p in the standard rate
and we've kept the top rate steady, so there won't be any big decreases
in taxes before the next election .
WILENIUS: Gordon Brown doesn't
want to be accused of putting up the burden of taxes and he could cut tax
rates again before the next election. But he's facing growing pressure
from his own party and some voters who want better public services rather
than more tax cuts. They want the Chancellor to show that he can be more
generous and caring than the Tories. Brown now faces the problem that in
the first two years Labour increased spending more slowly than the last
Tory government. To some he was prudent, but to others he just appeared
mean. Now he's got a lot of ground to make up. Many in the party want him
to spend billions of pounds extra on health, education, pensions and so
on. They want Brown to turn his back on tax cuts and start giving generously
to hospitals, schools and much more.
RADICE: We're in the Labour Party
because we want, partly because we want to see extra resources go to public
services. We want to see public services which have been badly starved
in investment - particularly education and health - we want to see them
properly funded .
CLIVE SOLEY: At the end of the day it is
about delivery. We have to show that things like education and health are
better at the end of our first term of office than they were before and
we have to be able to point above all to our own activists and core voters
that that money is going in our step by step increase.
ACTUALITY:
WILENIUS: Taking a close look at
the figures the economy is doing well and Brown has kept spending very
tight.
DILNOT: If you look at current
spending and strip out capital spending there is less spending under this
Labour government than there was under the Conservatives.
WILENIUS: There's no doubt he
has a lot of money to play with, although there's some debate over exactly
how much.
DILNOT: It was far below this at
the beginning of the Parliament, but now you can see the government is
in surplus. I think there's no doubt that the Chancellor's got a bit of
room for manoeuvre, the economy's being doing very well, taxes have been
buoyant, public spending has been growing quite slowly, so if he hasn't
got some room for manoeuvre now I think he never would. I think he might
have seven, eight, nine, ten billion pounds of room for manoeuvre a year
by the end of the Parliament.
PRENTIS: We understand that the
Chancellor has got something like eighteen billion pounds in surpluses,
we also understand that over the next four years those surpluses will rise.
It is our understanding, that all of the money that is needed to restore
our public services to the levels that they were ten, fifteen, twenty years
ago, all the money that is needed is available without borrowing a single
penny and if that is the case I think there is no excuse for not taking
action now. There will never ever be a better time.
WILENIUS: Gordon Brown is putting
the finishing touches to his Budget here at the Treasury, and it could
be his most difficult yet. If he spends too much, he could destroy his
reputation for prudence and lose his new found friends in business. But
if he spends too little he will undoubtedly upset many in his own party
who feel he hasn't delivered enough for Labour's traditional voters.
GORDON BROWN: Our Labour pioneers had a
dream. They had a vision, they saw beyond the here and now because hard
times did not teach them selfishness but solidarity. Our socialism,credible
and radical. Join us, join with Labour, join us, join us on a journey.
WILENIUS: Those who joined Labour,
and stuck with it through the dark times, now feel it is time to deliver.
They feel Brown has done enough to show that Labour can be trusted with
the economy. They want him to show he cares by spending billions of pounds
helping the less well off , and boosting public services .
PRENTIS: Now time is the time for
Gordon to actually show that he has got a heart as well as being an Iron
Chancellor, you know the yellow brick road is there for him and I actually
believe that he could do a great deal of good for this country and for
himself if he does grasp the nettle and deal with the issues that are transparent
to everybody, and if he can deal with them now, well before a general election
I think he will be quids in when he comes to the next election.
RADICE: Its clearly important for
the party; but it's important for the government because we actually have
some major commitments in our manifesto, on education and health, that
there really is going to be a difference; and we've got to show before
the next election that these big increases in education and health investment
are really coming through and are really changing what schools are like
and really changing the National Health Service.
WILENIUS: But here's the biggest
danger and frustration for Brown. His prudence may have helped him amass
a huge war chest, but he will not be able to spend it all. If he starts
pumping too much money into public services and into people's pockets he
could overheat the economy. Inflation could be stoked up, the Bank of England
could be forced to put interest rates again and the Pound would get even
stronger, harming export industries.
DILNOT: It's unlikely that he could
very easily spend all of that money in this budget because if he were to
spend it now I think the City would say hang on a moment Chancellor, you've
got the monetary policy committee raising interest rates which is raising
the strength of the pound and yet here you are in your budget loosening
fiscal policy and trying to boost the economy, surely that can't be right.
BARKER: In terms of this budget
I think that the business community wouldn't like to see a lot of extra
amounts of spending over the next year at all. The real concern is that
Gordon Brown keeps the budget as tight as possible in order to keep pressure
off higher interest rates and that is really the overriding concern for
a lot of smaller businesses, a lot of exporters.
WILENIUS: Brown's standing in the
Labour Party at the moment is rising, but to maintain that he must show
he cares. Party activists and MPs want him to spend freely. But if the
pressure to remain prudent and please Middle England is too great, it
may cost him the popularity he so values in his own party.
SOLEY: He's got to be able to deliver
the economics of it and so far he's done that brilliantly. But that balance
is going to go on tearing our, at the you know the heart and the head of
the Labour movement and the Labour Party, and the Labour government, its
going to go on tearing at it. But at the moment we do need to do more
public expenditure . We need to focus on these key areas, health education,
pensions and so on .We do need to focus on them.
WILENIUS: So to keep the Labour
Party together on its journey, Brown must spending billions of pounds
more on public services. But he must also stop taxes rising to make sure
he doesn't scare away his new Labour converts. The balance between the
two has to be just right - for the light to continue shining on Labour's
prospects at the next election.
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