Hunting for a stray #1500m

The barman was the calculating sort. ''When you think about it, that's #48 an hour they're charging,'' he chipped in. ''That's right,'' agreed the shorn one. ''And her that cut it was probably a trainee.'' The old boy sighed, drowning his dismay at being so wantonly ripped off in another pint of Doris's best, brewed in the small brewery at the bottom of the pub garden.

I am guessing, of course. But neither man seemed overly preoccupied with the latest #1500m hole in Labour's fiscal plans exploited by Deputy Prime Minister Michael Heseltine on Thursday and promptly filled to overflowing, before the weekend was out, by Tony Blair's remarkable U-turn on privatisation.

That #1500m is a hole of the Tories' own devising. It is their own forecast proceeds from further privatisations next year (1998/99) published as usual in the latest Treasury red book. Ken Clarke is saying, in effect: this is how much I think I can raise, but we're not saying which new lots will go into this particular sale yet.

Now Gordon Brown has, you will recall, adopted, without qualification, Tory spending targets for both this year and next. But even New Labour, under Tony Blair, has been hostile to the Government's ongoing privatisation programme, most recently fighting the sale of the rail operating companies. So where else, Heseltine wanted to know, would Gordon Brown find that #1500m if it wasn't to come from selling state assets?

As it happens, the Deputy PM isn't too sure where the Tories will find that same money, if they are re-elected. The plan to sell off the Post Office caused a bust-up with some of his own back benchers in the last parliament. Air Traffic Control? Channel 4? Who knows? But, after months of apparently futile attacks on the Old Labour profligacy allegedly hiding behind the Blair mask, Heseltine clearly hit a raw nerve. And produced a totally disproportionate response.

Labour's response is a promise that, in Government, it will launch a thorough review of all remaining state assets, pledging to sell anything that isn't needed or could be better run by the private sector. There's been some semantic babble about it not really being a U-turn, not so much embracing Mrs Thatcher's flagship policy as some miraculous new third way, emerging from the rubble of Clause 4, of managing the interface between the public and private sectors. Don't be deceived. In reality, it's grand policy larceny.

The intriguing question is why. Revenues of #1500m are seriously small change in a Government spending programme of #327bn already pencilled in for that same year. And the forecast proceeds from privatisation are more than covered by the #5000m contingency reserve proposed for the spending side of the 1998/99 books. So why produce a policy sledgehammer to crack what looks, at first sight, like a presentational nut?

We all know by now that the Blair leadership is resolutely determined to slough off Labour's tax-and-spend past. The commitment not to raise the basic or higher rates of income tax over the life of the next Parliament; the adoption of the Tories' next two years spending plans; the sparse and meticulously costed new spending commitments in education, health, and job creation; the draconian policing of what every party spokesman and woman promises; all are designed to nurture the same image of a transformed, fiscally responsible party, with no hidden agenda, no policy surprises.

In that mindset, even a stray #1500m must be hunted down and accounted for before it damages voter credibility. They may be talking about other things in the Old Crown. But in the kind of reactive politics New Labour has now mastered, where you build your (modest) policy edifice and defend it - and only it - against all comers, you cannot afford to take any risks, even with the small change. Next week the shorn one in the Old Crown might stop moaning about the cost of his haircut and start worrying about the cost of a Labour Government.

You can trace a very similar, if more protracted, process at work in Labour's defensive rebuttal of Michael Forsyth's tartan tax campaign. While I was away Tony Blair got into trouble yet again over the Scottish question. But he has now made it explicitly clear that, were a Scottish parliament with tax-varying powers to get referendum approval and were Labour to control it, no use would be made of that tax power over the life of that first parliament when income tax rates in the UK are being frozen.

He first made that specific promise back in December 1995, in an interview my former colleague Ben Brogan and I had with him at Westminster. At the time his press secretary Alastair Campbell emphatically denied that part of our story, despite the fact that a very senior Shadow Cabinet member had earlier encouraged us in our interpretation of what was proposed. Sixteen months and a variety of referendum proposals later, the Labour leader now feels confident enough in his own authority over his party openly to impose that policy on the Scottish wing of his party.

As with the tartan tax, so with privatisation proceeds. The attack is defused, this time, of necessity, in rather more haste. But is there something more in this latest adjustment? This move isn't just a defensive, reactive attempt to head off a promising Heseltine sortie. The scale of the pledge to review the role of all state assets is out of all proportion to the need to plug a #1500m gap in the fiscal arithmetic.

This, like the tougher line on the unions and the harder, more sceptical approach to EMU, makes New Labour even harder to distinguish from the party whose place in Government they seek. If Labour isn't careful it will turn the defence of its policy promises into an act of political cloning.