This morning’s headline news concerns well-sourced speculation that Labour is likely to rewrite its fiscal rules.  The increasingly sick public finances are forcing Labour to consider much greater borrowing.  The Tory reaction to all of this is to don the hair shirts.  On Tuesday David Cameron warned that he might have to increase taxes.  The leading member of the Right within the shadow cabinet, Liam Fox, is giving Associations the same message.  This is what Dr Fox told Ealing and Acton Tories earlier this week:

"If your hanging your boots on thinking we can offer tax cuts if we win, then you can forget it… The fact is, the finances will be a lot worse than people think, just as it was in 1979, they’re always worse than they [Labour] say; back then it was four years before anything could be done, and this, again, is the situation that we will need to deal with when we win."

Dr Fox confirmed those words to ConservativeHome yesterday.  He said that he knew of a number of "unpaid bills" in his own area of responsibility, defence, and that national security must come before tax cuts.  He gave a similar message to the FT last month.

But just when you thought that tax cuts weren’t on the agenda, along comes Nick Clegg with his promise to cut the overall burden of taxation.  A leader in The Times questions the sketchiness of the LibDem leader’s plans but welcomes his attempt to shift the political debate.  Telegraph commentators Iain Dale and Janet Daley both welcome Mr Clegg’s intervention:

  • Iain Dale in today’s Telegraph: "He hasn’t just pledged a reduction in taxes; he has promised a cut in public spending, too. Admittedly, it is only £20 billion, a mere three per cent of total government spending, but it’s a start. And it’s a damn sight more than any other politician has had the guts to do."
  • Janet Daley yesterday on The Telegraph blog: "Mr Clegg has spoken the words which no Tory frontbencher will dare to utter: the poor are paying too much tax (far more in proportion to their income than the rich), and the Government is spending too much money."

We’re not so ready to applaud Mr Clegg.  As we argued on Wednesday, Nick Clegg’s social policies mean that he’ll do little to reduce the long-term demands on the state.  He doesn’t have credibility.  Conservatives MUST realise, however, that the public mood has shifted on tax.  Just as every household is tightening its belts the Conservatives must put an end to the public spending supertanker and say that we will not continue to match Labour’s spending plans.  As soon as we break free from Labour’s spending plans we force the much-needed war on waste and begin to create space to reduce borrowing and introduce some economy-boosting tax relief.  We set out our other four tax’n’spending recommendations last month.

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