THE ECONOMY
The message to the Government from the grassroots
JOCK BRUCE-GARDYNE
his reduction from 30 to 29 per cent • • . represents the first cut in the basic rate of income tax since my predecessor took it down from 33 per cent in 1979. So long as this Government remains in office, it will not be the last!' Thus the Chancellor on Budget Day. He went on to remind us, just m case anyone had forgotten, that his predecessor had set his sights on a basic rate of 'not more than 25 per cent'. 'I share that aim'. But naturally. After all, he wrote it in, way back in '79. Ah-ha, we said. So that's the game. He's putting the 'Wets' in the Cabinet on the spot. He's bounced them. Come the public spending exercise this autumn, if they pre-empt his room for tax cuts in 1987, they'll have some explaining to do. Twenty-five per cent is what we were promised, and what we expect. Let them Just try and tell us how they stole our expectations. Bounced they may have been, on Budget Day. It doesn't altogether look as though they're going to stay that way. The message garnered from the grassroots last week, so we are told, is that the 25p tax rate is what the 'semi-detached' John Biffen calls 'one marker in the debate'. Other markers' which (though he didn't say so) are reckoned to have more sex- appeal upon the doorstep concern Whether we can have the trust in educa- tional reform that so many of us would like, without additional resources', and whether in fact the health service will need budgets even bigger than that which it now has.' John Biffen knows his onions. All Leaders of the House of Commons with any sense must be attuned to sentiment around the corridors of Westminster. But none in recent times could match John Bitten's sensitiveness. Now in this vale of tears choices are rarely quite as stark as it sometimes suits the Treasury to present them. 'Additional resources' for our schoolrooms, and budgets even bigger' for our hospitals can yet turn out to be compatible with tax cuts in 1987. It only takes some tanking up of assets sales, an unexpectedly buoyant fore- cast of revenues from oil and from general taxation, and a pinch of creative arithmetic with the contingencies fund, and the inabil- ity of Whitehall departments to spend in fu the budgets they are finally conceded. 11 Stranger things have happened, even under Mrs Thatcher. Government borrow- ing may be pronounced a Devil, but it is a Devil with whom our masters have regular- ly been supping, when Professor Marris was apparently not looking.
The worry for the Government is that it does not seem to be particularly cost- effective. The customers are not notably impressed. If waiting-lists for hernias shrank and scanners came to every cottage hospital, or if truancy gave place to im- pressive '0' levels, because Nigel Lawson `listened' as his colleague Malcolm Rifkind says he should and slackened off the purse strings, why then perhaps the voters would be grateful. Even if it only meant some extra jobs for teachers and GPs, it might at least make an impact on the dole queues. But harsh experience suggests that most of the 'additional resources' and 'even bigger budgets' would be swallowed up by those already on the payroll. Of course if you believe, as Professor Marris and his friends believe, that we can be induced 'cheerfully to collaborate with government pay and prices policies', and also that additional demand generated by greater spending power will automatically be matched by extra output here at home, then Bob's your uncle. And presumably he's not the sort of relation who worries very much how you hold down pay and create more spending power simultaneous- ly (other than by engineering falling prices, which would give the good Professor kit- tens). But these are not the creeds to which our masters owe allegiance. The Chancellor, it is true, has his scheme for linking up to profits, which he formally unveiled at Neddy earlier this week. It isn't difficult to see what he is after, since we do not have to search the works of American labour market theorists: we have only to look at a practical demonstration in Japan. There the very high ratio of annual discre- tionary bonuses, which go up and down with profits, to contractual pay does, by `We're off to see the spectacular jams on the M25.' common consent, facilitate job security in large concerns. But with the best will in the world (which neither the CBI nor the TUC is likely to display) such schemes could not begin to make themselves felt until well on into the next Parliament. Besides, they would not help at all to divert 'additional resources' from men to materials in health or education, since in the public sector they do not make profits for the pay to be related to.
So what are the Cabinet to do, con- fronted by the disaffection of the peasan- try? It could do worse than count its blessings. These are not inconsiderable. Commodity prices softening our factory costs. Lower interest rates and mortgage charges, as the Japanese and Germans slash their rates in the (probably forlorn) expectation that this will stabilise the dol- lar. A widening gap between the growth of take-home pay and the growth of prices.
This strikingly resembles, as it happens, the background to the last occasion when the Tory Party won a third election victory on the trot, in 1959 — for those (and it is obviously a major, although — as John Biffen commented judiciously on Sunday — not necessarily a decisive difference) in employment.
It may be, of course, that the voters have really had as much as they can take of the strife to make us more competitive. They may really think that we can spend a lot more cash and thereby get a better service for the elderly and sick, and cut the dole queues. They may even reckon that if the trades union barons tripped in and out of Downing Street as they used to do, we should be spared such ugly scenes as those at Wapping. They would soon be dis- abused. But if that is their mood, and the one that they take with them to the polling booths, the Tory Party might as well go quietly. For go it will. If public spending is promoted as the cure for all our ills the electorate will shrewdly opt for the Party that believes in it.
It by no means follows, however, that mid-term impatience with the inadequacy of certain public services will override material self-interest when the voters face the choice of Government, rather than the choice of local councils and individual representatives at Westminster. They might well decide after all on balance to `keep a hold of nurse, for fear of finding something worse.'
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