POLITICS
Wanted: a few years of good old-fashioned Treasury government
SIMON HEFFER
If you are fed up with reading about how the election result means that government policies must be right, what follows. may console you. This column will be a eupho- ria-free zone. The grave problems Britain had before the election prevail after it. We are still in recession. We still have an eco- nomic policy that is keeping our interest rates 2 per cent higher than they need be. Unemployment is 2.6 million and rising. Above all, the Government is still borrow- ing frightening amounts of money.
One of the few statements of ideological principle in the Tories' uninspiring mani- festo was that 'we will make further prowess towards a basic Income Tax rate of 20p. We will reduce the share of national income taken by the public sector. We will see the budget return towards balance as the economy recovers.' It is the vision which, we are told, won the Tories the elec- tion. Therefore, it would at least show grat- itude if they could stick to their promises. Yet financial experts talk of this year's pub- lic sector borrowing requirement of £28 bil- lion turning out as one of £37-40 billion. One or two talk of £50 billion next year. You cannot cut taxes if you borrow on such a third-world scale. And such borrowing is caused by an over-large state, with all the denials of individual liberties that involves.
Worse, from a political point of view, is that if this Government cannot cut taxes, the voters may begin to feel they were tricked. The man responsible for rectifying this unpleasant state of affairs is Mr Por- tillo, the new Chief Secretary. Mr Portillo is what unsophisticated observers call a Thatcherite. To spare him embarrassment by association, and an early run-in with the thought-police of Mr Richard Ryder, the Chief Whip, it might be more tactful to describe him as a radical rightist.
We do not need to make any supposi- tions about Mr Portillo. Shortly before the election, the Conservative Political Centre
published a pamphlet by him called A Vision for the 1990s. A few quotations will
suffice to give the flavour of it, and of him: Now we need a new goal: the ultra low-tax economy... No Conservative can want to rest at present levels of taxation in Britain. We still take from the average man and woman more than a third of every marginal pound of earnings in tax and national insurance...Our belief in the primacy of the individual over the State also points us towards the goal of the ultra low-tax economy. It extends free-
dom. It enhances prosperity.
A minister contemplating discussing his departmental budget with Mr Portillo would do well to note those words. We are at the start of the electoral cycle. Savings must be made now to achieve the aims of the Government. These aims are, in fact, the same as those of the Portillo pamphlet, though the Chief Secretary's turns of phrase might well be deemed too robust for the faint-hearted. Before the election, Mr Major doled out bribes promiscuously. In the campaign, he said that there was 'no hidden agenda' of public spending cuts. This greatly chagrined those of us who thought there ought to be. Mr Portillo's on- the-record statements suggest, however, that he will want to conduct a stiff public spending round this autumn.
The cabinet reshuffle has given him one important ally. Mr Lilley, the new Social Security Secretary, is the closest Mr Portillo will find to a soul-mate in the cabinet. Mr Lilley finds himself in charge of a budget of £70 billion a year, or almost a third of total spending. As the misguided economic poli- cy puts more people on the dole and in need of other benefits, so the demands on Mr Lilley's department rise. The victims of the economic policy also stop paying direct taxes, and have little to spend on goods bearing indirect ones. Thus as demands on welfare grow, so the resources to finance them shrink.
As a priority, the Treasury ought to look at ways of cutting the welfare budget. Mr Lilley is likely to be keen to help. He and Mr Portillo will not, though, be assisted by the abnormal political sensitivity of the matter. The best way in the short term to take pressure off the welfare budget would be to cut interest rates substantially to help get people back to work. The leadership does not hold this view. The Treasury should try to convert Mr Major to it. Wel- fare symbolises the tough decisions that will have to be taken. It also symbolises just how far from perfect things are.
There are other obvious places to which Mr Portillo can look for savings. Mr Howard, the new Environment Secretary, is allegedly a man of the radical Right. His priority must be to establish unitary local authorities as speedily as possible, stripping out one whole level of bureaucracy across the country. He must then complete the Ridley vision of local authorities as enablers rather than providers of services, by completing the privatisation of all local government functions. Wage bargaining in local government must be decentralised. Mr Portillo must try to persuade other col- leagues in charge of large public sector empires — like Mrs Bottomley at Health, and even the Prime Minster as Minister for the Civil Service — to attempt such cost- cutting restructurings. But the greatest challenge of all for him will be his former boss, Mr Heseltine, now Secretary of State for Trade and Industry.
Mr Heseltine's new position is the one which, after the premiership, he has always most coveted. His books, his articles and his speeches have told us for years how he wanted to make the DTI rival the Treasury in importance. Now, doubtless in tandem with like-minded corporatists in Europe, he can construct a neo-federalist industrial policy, picking winners, planning centrally a la George Brown, and scrapping the Gov- ernment's commitment to the rule of the market. It is salutary to note that there is nothing in the manifesto to stop him. Like an old tart, Hezza can now start proposi- tioning Mr Major with seductive whispers of 'Fancy a little intervention, dearie?' Intervention does, though, cost money. If Mr Portillo chooses to give him no more than the DTI receives already, Mr Hesel- tine will find it hard to mount his campaign of state interference in the private sector.
Last year, in the pre-election spending round, some high-bidding ministers were told by Mr Mellor, the then Chief Secre- tary, to get lost. They complained to Mr Major, who overruled Mr Mellor. The next round will not, though, be a pre-election one. If Mr Major cannot sec the impor- tance of drastic cuts now, it should not be left to the most junior member of his cabi- net to make him. It is up to Mr Lamont, the Chancellor, to throw his weight around in a way he did not before last week's victory. If Mr Lamont does not want to get tough, he should recall what Mr Heseltine said about the Treasury relationship with the DTI (best seen in his personal manifesto, Where There's a Will). Mr Heseltine wants carte blanche from the Treasury. He wants to shake the Treasury's grip on the economy. If the Treasury wants to impose any sort of discipline on the rest of the Government, they must start with Mr Heseltine.
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