IAIN WATSON: With the budget just a month
away, opposition politicians, business leaders and even Tony Blair will
be anxious to find out what the Chancellor has got in store for us. Now,
just imagine if we could get access to Gordon Brown's lair here at number
11 Downing Street, get a peek inside that famous budget box. Ah we can
Sadly, even the power of the imagination isn't enough to breach the secrets
of the Chancellor's budget box. But if we were given free rein to root
around Gordon Brown's office, perhaps we could find some clues as to its
content. Ministers appear to have been briefing the press that a tax rise
is on the way, at least to fund the NHS. But is everything just what it
seems? And is Labour really confident about coaxing a tax-resistant middle
England to pay more for public services?
JAMES PURNELL MP: The government was elected on
an agenda of improving public services, it's quite clear that those public
services have not had the money that they needed over the last ten or twenty
years and if we are going to see real improvements in public services the
money will need to go in and that may have to mean tax increases at some
DEBORAH MATTINSON: People are now valuing public
services and they also are not unrealistic, they know that they won't improve
without more money being spent, and for the first time for a long time
they're saying yes, actually, eighty- seven per cent of the population
are saying 'I'd be prepared to pay more taxes for a better NHS.
WATSON: Voters may well want to
see more money spent on public services, but the real mystery is why the
government is hinting that taxes have to increase to achieve this. Now
if this could be opened up, it would show that finances are in a much
healthier state than the Chancellor's dour demeanor tends to suggest. So
he won't actually have to increase taxes this year at all. But if he wants
to keep health spending growing at its current high levels, then he may
have to increase taxes in future years. But the advice from those close
to his next door neighbour suggests is that any increases should be kept
low and well targeted.
PURNELL: I think it's very important
for people within the Labour Party to realise that this debate will only
be won if the public see improvements in public services, if any increase
in public spending or any necessary increase in taxation are targeted and
limited and there's no return to punitive taxation or to ducking the difficult
decisions on public spending which we took in the first term.
WATSON: For a Chancellor who's
been denounced for increasing tax by stealth, he now seems to be uncharacteristically
open about his intentions. But by warning that taxes may now go up, Labour
are also symbolically signaling their seriousness about funding the NHS.
And there may be an additional advantage to talking up tax rises.
ANDREW DILNOT: It's certainly the case
that if you think you are going to have to put up taxes it's a good idea
to try to frighten people in advance so that however large the tax increase
that you do announce is a bit less large than the worse that people were
fearing. I think we saw some examples of that earlier in the 1990's, I
think some of that may be going on.
WATSON: So any tax increases we
see may be quite modest, but most Labour MPs would rejoice that the principle
of paying more for better services has been firmly established, turning
on its head the 'something for nothing' culture of New Labour. The debate
going on within the Treasury and more widely within government isn't so
much about whether tax will increase, but when.
It looks like the Chancellor is receiving some advice not to do anything
too hasty. The head of an influential Labour think-tank warns that voters
are still volatile on the question of tax, and that they need reassurance
that the money the government currently has is being spent more wisely.
MICHAEL JACOBS: The government needs to
prove that when you put more money into the public services you do actually
get results, they have been putting the money in over the last two years
but they haven't really got the results yet. In two years time they're
may be able to prove that the extra money does work and then they can say
but we still need more, that's when the tax rises will come in.
WATSON: The argument over timing
will be resolved by budget day, one month from now. What seems certain
is that well before the next election, Labour will be asking for more cash
to improve the NHS. Although this carries political risks, there are potential
benefits. The Liberal Democrats could lose their unique selling point as
the only party willing openly to increase taxes to pay for better public
services. And the Tories are being advised not to oppose any increases
FRANCIS MAUDE MP: I think if there is what looks
like a tax increase it would be quite difficult for the Conservatives to
oppose those tax increases. We would want to say that money in doesn't
represent quality out and I think people are very amenable to that. But
I think we would want to say, you promised you are going to reform the
public services and make them better, you'll be judged on whether you do
so. We're not going to oppose any increases in tax there are going to
be but we are going to judge you very strictly on whether you have made
the improvements in the public services which you've promised.
WATSON: And the former Conservative
Shadow Chancellor would go further, advising his current leader not to
look for tax cuts in the next term of a Tory government, if voters are
still demanding cash for public services.
MAUDE: So I think it will be quite
important to add to what Michael Howard and Iain Duncan Smith have already
said when they have said that public services will take precedence over
tax cuts and I think we will need to say, before the next election, that
because of the parlous state of public services and because of the need,
the urgent need for reform in those public services and because reform
in public services does demand more money - at least in the short term
- therefore we, the Conservatives do not expect to be able to cut taxes
in our first term in Government, because of the needs of the public services.
WATSON: For those of you who've
ever filled in a self assessment form, you'll know by now that nothing
about tax is straightforward. So the tables could yet be turned on Labour.
One of the options the Chancellor is looking at for a tax increase would
be a rise in national insurance contributions, roughly equivalent to a
penny on income tax. Though that doesn't raise a huge amount, the trouble
is, it may increase voters' aspirations for the funding the public services
which simply can't be satisfied. So some say Labour must be more transparent
about tax and spending if they are to avoid an electoral backlash.
JACOBS: And I think the public need to
be given much better information about taxes and spending. For example,
we could send a leaflet to every self-assessment payer with their self-assessment
form which sets out the taxes that we pay and where the money has gone.
And also what the governments been doing with it over the last year; it's
interesting that local government sends a leaflet out to all tax payers
but central government doesn't. That information in my view should come
not from the government however but from the National Audit Office which
is an independent body. Unfortunately people don't believe politicians
when they talk about taxes and spending. So I think if we're going to have
credible information it's got to come from an independent body and I think
the National Audit Office should be given that task.
MATTINSON: People are realistic, they know
that Rome wasn't built in a day, they don't expect the NHS to be transformed
overnight, but they do need to be told what they can expect to happen and
when they can expect it to happen by, and I'd also suggest that within
that mix the government does make sure that there are some quick wins,
there are some visible changes.
WATSON: People have to see tangible
improvements in the public services they use every day. But it may be difficult
to achieve this before the next election, no matter how much Labour is
DILNOT: There isn't a pool of extra doctors,
nurses and support staff, unemployed, waiting for Mr Milburn to pick up
the phone and say - come and help us. They're doing something else, so
drawing them in has turned out to already be very difficult, the same is
true in education, the same is true to some extent in transport for people,
but in transport also clearly for the resources to do capital projects
or to build schools or to build hospitals, so pretty quickly shifting the
structure of the British economy or indeed any other economy isn't very
easy. I think between now and the time of the likely next election the
government is going to struggle really to transform things.
MATTINSON: If Labour gets this wrong, that
is to say, if they put taxes up but people don't feel that they've got
a result then I think that then questions that strategy and it gives the
Conservatives an opportunity to start challenging that strategy and perhaps
the campaign that they've been running, you know you've paid the taxes,
where are the nurses, would really sort of find it's opportunity at that
WATSON: So it's a high risk strategy;
if people see improvements in public services, they may be less resistant
to paying more tax; but, on the evidence so far, the government has quite
some way to go to match service delivery with voters' aspirations.