Hain taxes his master's patience by raising unpalatable truth

London Briefing Chris JohnsI'm old enough to remember Peter Hain MP as a radical anti-apartheid protester, part of a movement that dug up rugby pitches in protest over Springbok tours of the UK.

In a flashback to those radical days, he caused a furore over the past week by suggesting that the rich should pay more tax. That this earned rebukes from both the Treasury and Tony Blair, forcing a hasty retraction, reveals just how sensitive the issue is.

But the damage was done. The knee-jerk reaction of New Labour to any suggestion of a reversion to the bad old days of "tax and spend" had to be quashed immediately. Trouble is, what Hain suggested should happen already has, and no amount of spin-doctoring can conceal the fact that taxes and spending have shot up in recent years with little obvious to show for it.

Clare Short said something similar a few years ago and got into equally hot water from her remarks. She said that she felt that "people like her" should pay more tax. Which is an interesting twist, with the virtue of honesty, since most proponents of higher taxation, like Peter Hain, usually want somebody else's tax to go up.

The howls of protest that greeted Short's remarks missed the point. Short should have been politely told that she is quite free, as is anybody, to pay more tax if she wants to. This should, in fact, be the acid test for any advocate of higher taxation: ask them if they already volunteer more money than the bare minimum to the exchequer.

Hain has done us a service because he forced Blair to say, unequivocally, that the top rate of tax, 40 per cent is still sacrosanct and it will not go up while he is in charge. Sorry Tony, your rise in the rate of national insurance contributions put every higher rate tax payer on a marginal rate of 41 per cent: a higher tax rate in everything but name.

This kind of disgraceful double-speak fools nobody and is one of the reasons why Blair is sinking in the polls and, unbelievably, allowing speculation that he might just lose the next general election.

The second favour that Hain did was to remind us of some simple arithmetic. There are still huge spending increases in the pipeline that will need to be financed. If Gordon Brown's optimism over the economy proves illusory, he is either going to have to borrow more or raise taxes. Probably both.

And the much-vaunted increase in public sector provision is still largely invisible. Despite all the billions spent so far, few people can spot an improved health service or better quality schools. As this column argued when these spending plans were announced, the biggest improvements have been seen in public sector wages. This is not to say some public servants didn't deserve more, but more to point out just how much money has to be spent before the desired quality improvements will be seen.

And there lies the rub. The government is almost certainly going to have to spend more than it has allowed for if it is to make any difference before the next general election. If that is right, it is hard to see how further rises in taxation will not be necessary.

In the end, it comes down to honesty. Why are they not capable of saying to the British people, "if you want this level of public service you have to pay this amount in tax".

The health service debate in Britain and Ireland is the same. Basic unpalatable facts are simply ignored because they are too difficult. Nobody is willing to confront a basic truth: healthcare is a scarce resource that is either shared out via the market or via queues. You either pay up or get in line. The fact that no other way exists, anywhere, is merely an inconvenient fact many people are unwilling to accept. Anybody who believes anything else is equally capable of believing the earth is flat.

What is so difficult about this? Human nature being what it is, like Peter Hain, most people will vote for somebody else's taxes to go up. That's a circle that politicians are paid to square. You don't do it by putting up taxes and then pretending you haven't. And by pretending that they won't go up again.