Time for Brown to end the stealth

You can always tell when Gordon Brown is about to tread the boards. The media start carrying stories about "stealth taxes" and how the Chancellor is about to pick our pockets yet again. So, as he finalises his plans, to be announced next week, for public spending up to the next election, nobody should be surprised by the latest pair of warnings - that child benefit may be withdrawn two years earlier, and that council taxes could rise next spring by far more than inflation. Both stories are probably true. Three months ago, the Treasury openly mooted the idea of abolishing child benefit for over-16s, and instead paying pupils from families on average and below-average incomes to stay on at school. As for council tax, the obvious riposte is: what's new? In most areas it has been rising faster than inflation for years.

The more interesting question is: can Gordon keep on getting away with it? The Conservatives point out, quite correctly, that the Chancellor has imposed a variety of "stealth taxes" over the past five years. Yet none of this has done Labour or Mr Brown the least harm. Last year's election produced another landslide. Suburban marginals swung even more Labour's way. And the Chancellor's own ratings have climbed even higher than ever.

There is, I think, a fairly straightforward reason. Yes, middle Britain has been hit by the burden of stealth taxes, but it has also received the bounty of, as it were, "stealth treats". And the key point is that, so far, most people have found that the bounty exceeds the burden.

Consider child benefit. This has risen sharply since 1997, especially for the first child. Most families also now receive children's tax credit. These two sets of changes are worth an extra £16 a week to a two-child family paying standard rate tax.

As for council tax, my guess is that predictions of a "£100 a year increase" next spring are a little too high. But even if they turn out to be spot on, they should be put in the context of people's wider experiences over the past five years.

Imagine a typical London family that bought a £100,000 house in early 1997 and took out an £80,000 mortgage. Since then it has been hit by the abolition of mortgage tax relief. This has cost it £6 a week. Past council tax increases have, typically, pushed the total up by £4 a week more than inflation. Now an extra £2 is on the cards, bringing the total in extra housing "stealth taxes" since 1997 to £12 a week.

That, though, is only one side of the story. Mortgage rates have fallen by two percentage points. This is worth no less than £30 a week to our typical family. What is more, their house has doubled in value. In cash terms, our family's property wealth has ballooned at an average rate of £400 a week since Mr Brown took charge of the nation's finances.

This may make economists nervous, and trouble the capital's first-time buyers, but it delights almost everyone who had already started to climb the property ladder before Labour came to power. When stealth treats are this big, stealth taxes of a few pounds a week are easily brushed aside.

That is the good news for Mr Brown. The bad news is that this alchemy cannot last forever. The warning signs are already visible. The annual rise in petrol taxes had to stop following the fuel protests two years ago. The cost of the extra £5billion a year charge on pension funds has started to bite, now that shares have fallen back to 1997 levels.

Looking further ahead, house prices cannot continue rising at their current rate for much longer. Mortgage rates will not fall any lower, and are more likely to rise. Cash payments to most families with children will probably rise no faster than inflation from over the next few years.

If the Chancellor wishes to raise taxes from now on, he will have to make the case openly, as he did in this year's Budget. He can no longer rely on future stealth treats to mask the pain of future stealth taxes.