No room for tax breaks in Brown's vision

London Briefing: The rush to occupy the centre ground of British politics is as recent as it is now well documented

London Briefing: The rush to occupy the centre ground of British politics is as recent as it is now well documented. The three main political parties (assuming that the Lib Dems still count) struggle to differentiate themselves in front of an increasingly bored and disillusioned electorate, writes Chris Johns

Political wheels have come full circle with Tony Blair a victim of the allegation of sleaze that, when applied to the Tories, largely won him his first election landslide.

In 1997 sleaze was only part of the story. The Tories had been holed below the waterline much earlier in the decade thanks to the debacle over Britain's abortive membership of the Exchange Rate Mechanism. To this day, the Conservative party has struggled to re-establish its reputation as competent managers of the economy.

As the old battle lines between left and right have faded, little of substance distinguishes the parties, particularly with Blair spending much of the last nine years pinching his opponents' best ideas. We now have the remarkable spectacle of a Labour prime minister now more popular with Conservative MPs than he is with his own back-benchers.

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If there is to be a serious battle, one of any substance, it will inevitably be fought over the economy.

Gordon Brown may now be the longest serving chancellor of the exchequer in living memory but he will still be remembered largely for one bold policy move, making the Bank of England independent. The rest of his tenure has been marked by an increasing complexity of the public finances and a stealthy unwinding of the fiscal reforms he inherited from his Tory predecessors.

Brown took office and immediately promised to keep to the spending plans of the previous administration, at least for the first few years of New Labour's tenure.

Once we had all been lulled into a false sense of fiscal security, the chancellor reverted to type. Dozens of rises in stealth taxes were accompanied by an explosion in public spending that managed to outpace even Brown's tax-raising ingenuity. A fiscal surplus of £20 billion (€28.9 billion) was turned into a £20 billion deficit within six years. Moreover, taxation soared from a low of just under 33 per cent of GDP under the Tories to its current level of nearly 39 per cent. We become more European by the day.

The Conservatives have struggled with all of this, floundering every time they try to promise to reverse any of the tax rises: Brown always demands, not unreasonably, to know which spending programme they would correspondingly cut.

The difficult argument to make is that much of Gordon's largesse has been dissipated in public sector pay rises rather than gains in the quality of services delivered. Hospital waiting lists have shortened, but not by as much as they could and should have. The NHS remains a resource sapping, bureaucratic nightmare but at least we have the world's highest paid doctors outside the US.

But if the British electorate is to be offered a meaningful choice at the next general election, it must be over taxes and spending.

It is probably fair to say that Brown will never preside over a tax cut; he hasn't done so yet and will certainly not do so when he is prime minister. Last week's budget provided further proof of this, if any were needed, with a gimmicky £440 million allocated to "extra" education spending rather than cutting taxes.

The chancellor's explicit reference to the decision over whether to award his fiscal leftovers to schools or the taxpayers is the first sign that he recognises where the difference lies between him and the new Tory leader, David Cameron. Brown has clearly decided to depict himself as a future prime minister who will devote any spare cash to schools. And the Tories are tarred as nasty neo-Thatcherites who would deny British children an extra stick of chalk in favour of tax cuts.

It would be nice if we were to be presented with a choice along these lines. But the Tories are understandably nervous about the charge that they will cut spending on education. And it is fascinating that Brown has chosen schools rather than the NHS - which received not a mention in his budget. Could he feel vulnerable to charges of waste and profligacy?

I doubt that Gordon feels vulnerable about anything but it seems that he wants to make sure of his coronation by promising to spend a lot more money on education.

Value for money, of course, is so 1980s.

Chris Johns is an investment strategist with Collins Stewart. All opinions are personal.