A dream budget, but will Gordon dare?

None of this makes sense. The country is awash with money. Not a day goes by but the economic situation is revised upwards. There is such a boom going on that all the financiers, industrialists and economic advisers are pleading for higher taxes to dampen things down. Day after day they cry out for it - the CBI, the city brokers, all begging: "Please, please put up the taxes!"

So how come Gordon Brown still says he will stick to his insane pre-election promise not only to keep to overall spending targets, but for each departmental budget to remain exactly as Kenneth Clarke left it? Clarke's budget was his little pre-election joke - a scorched earth, land-mine-strewn booby trap left behind by his retreating army to damage its conquering foe. Why should Brown oblige by marching his troops straight into it?

To remind you: the NHS and education are the worst-hit by current spending plans. The NHS has struggled by for the last 18 years on a 2.6 per cent real increase, and cannot manage on less. But this year it had only 0.9 per cent more and next year it faces a disastrous 0.6 per cent cut in real terms. This is only June, but already some large hospitals have stopped elective surgery. Trolleys are reaching midwinter levels in A & E departments as cancelled operations rapidly turn into emergency cases.

The figures for education are scarcely better. Without more money there will be neither smaller classes nor more teachers. How do you raise standards when teaching is such a low-grade occupation that it requires only two Ds and an E at A-level to get on to a training course? If we were spending the same proportion of GDP on education now as we were in 1979, the Government would have to find an extra pounds 2bn.

Now, which promises matter most? The pledge to keep within spending limits, despite vastly more money around than previously supposed, or the promise to improve health and schools? Gordon Brown is a clever man, and maybe he has a clever plan, but all the spin has been "No More Spending". The implied promise to the people, the one opinion polls told us was people's reason for voting Labour, was for better public services. If not in boom- time, then when?

What if, at the very least, Brown just relaxed the rule about not shifting spending from one department to another, keeping within the overall total? Then, if he were willing to tackle the biggest wasted budget of them all, he could do what needs to be done.

Defence is the empty spender. Cancel Euro-fighter and save pounds 15bn. Cancel the 386 Challenger 2 tanks, save pounds 1.1bn. Cancel the 64 EH101 helicopters, save pounds 1.5 bn. Abandon Trident, save pounds 1bn. Work towards reducing the defence budget to the European average, save pounds 11bn. Even a fraction of that money could do so much good elsewhere.

What else? An urban car tax could go a long way towards funding investment in good public transport and cycle routes. Charging pounds 10 a day for cars moving into central London would bring in pounds 7.5m a day - pounds 2.7bn a year. Ditto for other cities.

Braving the wrath of the pharmaceutical companies and forcing doctors to prescribe generic and non-branded drugs would bring in a handsome return for the rest of the health service.

Bringing prison numbers back down to pre-Michael Howard numbers would save pounds 480m to spend on intensive education, treatment and training inside prison and during community sentences.

Why not tax excessive media-ownership with a swingeing annual windfall tax until owners divest themselves of anything above, say, 20 per cent of newspaper readership? It would hit Murdoch's 40 per cent ownership hard. He could also be made to pay the estimated pounds 300m he has cleverly avoided paying the Treasury so far.

An urban dog tax would please the great majority of non-dog-owning city dwellers. A pounds 100 a year tax, on the "polluter pays" principle, would bring in about pounds 600m to spend on rejuvenating parks and public spaces.

Where is spending most needed? Crime is what worries people most - and a major "roots of crime" initiative would reap rich rewards. We are a low-investment country, our economists complain. But instead of investing in bricks and mortar, investing in people would save large sums in future expenditure on crime and justice.

The fate of the 51,000 children in care is a national disgrace, most of them leaving with no qualifications at all, many as addicts, criminals, prostitutes, and homeless or pregnant. Intensive education and therapy for the children who get least is desperately needed; 25 per cent of prisoners were brought up in care.

Alcohol and addiction programmes pay for themselves many times over. A recent study showed that 39 per cent of remand prisoners are addicts, and in the community an estimated 150,000 need help. Best schemes, such as those run by the Rehabilitation for Addicted Prisoners Trust, cost pounds 1,800 per prisoner.

Families in crisis need early intervention to stop them collapsing, and their children being taken into care. National Newpin offers self-help therapy groups for mothers who cannot cope, at a cost of pounds 3,000 per family. (Each child in care costs pounds 34,000 a year.) One successful Barnardos scheme helps 210 struggling mothers for pounds 150,000 a year, money well spent.

Nurseries for seriously disadvantaged three- and four-year-olds save their cost rapidly. The US High/Scope research shows a huge reduction in crime and welfare dependency later in life for all those children at risk who were given two years' intensive nursery education. Some 430,000 poor children in Britain would benefit, at a total cost of pounds 860m (far less than the Challenger tanks, and of far more use).

The manifesto promised after-school clubs "in all areas". Good schemes are needed for all children, not just to help single mothers go out to work, but to give extra tuition and homework help. The Millennium Trust turned down a pounds 200m bid for 1,000 high-quality clubs; instead we get the pounds 850m dome. Kids Club Network says it could provide clubs for a million children for pounds 50m.

So far, no money has been allocated to help get the 500,000 single parents with school-age children back to work. They are just as urgent a priority as the young unemployed. Children of single mothers who work do best. Also, single mothers are due to lose Lone Parent Benefit and One Parent Premium, making the poorest families yet poorer. Will Brown put up the pounds 160m to restore those payments, before the cut comes into force?

Despite the air of mystery and the economic verbiage, in the end a budget is a set of value judgements. Maybe this week we will get only a glimpse of the values of this government, and we shall have to wait until November for the full picture. But soon those choices have to be made. Would we rather have a glittering new armoury of weapons we cannot afford and do not need - or would we rather attack the roots of crime? Where now is the greatest threat to our security - from foreign shores, or from within the dark and dangerous recesses of our own society?