POLITICS

The Tories struggle to contain their chronic dose of economic incontinence

SIMON HEFFER

This election campaign seems inter- minable, but one risks forgetting how speedily its termination will come. Things are becoming urgent. In under three weeks the day should have been named; in just 50 days Mr Hattersley and Mr Kaufman could be passing billets-doux to each other across the Cabinet table. We are that close.

Thus the Tory party moves into its last, crucial stage of strategy. It is painful, though, to note what this strategy appears to be. Mr Major is acting in the manner of Mrs Viv Nicholson, the pools winner who vowed, with dire results, that she intended to 'spend, spend, spend'. Tory leaders are wont to look to their forebears for inspira- tion, to men like Disraeli, Churchill or (so Mr Major tells us) that old ninny Neville Chamberlain. To his pantheon of all-time Tory titans Mr Major seems, though, to have added one further shining example; the progenitor of the most disastrous Tory economic policy of the last 50 years, Mr Edward Heath.

On orders from Mr Heath his Chancel- lor, Lord Barber, cut taxes while bloating public spending, bringing chaos to the economy within two years. Mr Major is believed to be pressing Mr Lamont, his Chancellor, to cut taxes in the Budget on 10 March. Everybody is excited about the Budget, but it is not the significant event of the economic year. That will come after the election, in the autumn statement (or per- haps even before) when this Government or its successor has to face up to the crip- pling indebtedness being inflicted on this country. The Tories used to be committed to cutting public spending and to repaying the national debt. Now those aims have been ditched, the new line being to balance the books 'within the economic cycle'. In recent months, above inflation funding increases have been given to the NHS, social security, local government and the railways, to name but a few.

And, in the last week, the binge has gone on. On Friday there were small (though not insignificant) electoral bribes to those infected with the HIV virus under NHS care. On Monday there was the U-turn on EEC regional aid to our coalfields. But, far worse, there was the untroubled passage of the recommendations by public sector pay review bodies of pay rises far above infla- tion for hundreds of thousands of people in the less productive sectors of our economy. Amid the obsession with the important matter of lower interest rates, we seem (luckily for the Government) to have lost sight of an economic factor that keeps rates up: over-borrowing. The Government has become economically incontinent.

Nor do the Prime Minister's intentions look entirely sensible. A clue came from Mr Bruce Anderson, Mr Major's closest Fleet Street confidant, writing in this week's Sunday Express. He dismissed faint hearts who object to the present policy, arguing that there was nothing wrong with a deficit of, say, f28 billion next year. Mr Anderson justified this by saying the Ger- mans (whose economy has surer founda- tions than ours) were overspending by a similar proportion (4.5 per cent) of GDP. We are in a sad state. Despite bearing none of the costs of reunification and mass immi- gration, we borrow as much proportionate- ly as a richer country that does. The better public services the Tories promise will not come free. Perhaps Mr Anderson mentions a £28 billion deficit to prepare us for the worst.

As far as ministers are concerned, this is Mr Major's policy and, for what it is worth, it will be Mr Major's Budget. Mr Mellor, the Chief Secretary, whose job it is to con- duct the public spending round, is not to be blamed. Ministers testify he was ruthless in trying to keep spending down. The reaction of many ministers who found themselves so constrained was to say `Well, I'll have to go to talk to John about this'. When they talked to John, John inevitably ordered David not to be so tough.

Blame will also be directed at Mr Lam- ont. Yet none of Mr Lamont's friends (and he deserves more than he appears to have, as the problems are not of his doing) sup- pose he is a high spender, or a man longing to be cast as apostolic successor to Tony Barber. Mr Lamont is a tax-cutter. He does not believe in bloating the public sector at the expense of the private, or of (to use a commercial analogy) having a rights issue in order to pay a bigger dividend. With an election so close, his loyalty to his master and his party has to come first; otherwise there is no point his being in politics. He is not an arrogant man. Indeed, some of Mr Lamont's supporters argue he has not been throwing his weight around enough against the second-guessers and back-seat drivers of 10 Downing Street who have been telling him what the economic policy should be.

There are Chancellors, like the Thorney- crofts and Lawsons of this world, who put up with so much and then resign. Mr Lam- ont is not the resigning type. He has been beleaguered by a campaign of vilification in the press, blaming him for an economic policy he has executed but not designed, and few of his colleagues seem to have a good word for him. Indeed, to keep him on his toes, some ministers are going around whispering about his lack of `bottom' (a grossly unfair charge), and the possibility of his replacement by Mr Kenneth Clarke once the election is won.

If, after an election victory, Mr Lamont can assert what have always been under- stood to be his basic economic views, he can play the key role in the Government's attempt to ensure genuine recovery. It is hard to think of any other candidate for his job who has the rigour needed to restore fiscal and economic rectitude. He will be crucial, given his scepticism about Europe, in the battle to contain British contribu- tions to the EEC budget. Mr Mellor is regarded as certain to be promoted. If he is, Mr Lamont will need an unreconstruct- ed Thatcherite as his new Chief Secretary.

The Right will not tolerate profligacy from Mr Major once the election is over, as he must be astute enough to realise.

The Budget will have but a short-termist significance. A cut in taxes will allow the Tories to dare Labour to keep its promise to put them up again. That, with the help of

the uneven concentration of Labour's vote, could seal the Tories' return to office. It would be a just victory, in that they deserve

to have the wretched task of putting right the economic mess they have created. If the

country is not to suffer. high .taxation and higher than necessary interim rates, there will be little option but to change the policy after the election. The recession is too deep

to support a high deficit. There is no telling how long the 'cycle' in which the Hooks are to be balanced will have to be dragged out.

Even Labour, in its new Euro-disciplined form, might not spend more than this Gov- ernment, on current projections, is threat- ening to spend. In the weeks ahead there will be much rhetoric about Labour's plans for profligacy. For their own sakes, Tory rhetoricians should remember the story about people in glasshouses before they become too free with the stones.