Forgive a little self-congratulation but ConHome was the first to campaign against the Tory pledge to match Labour’s spending plans, we were the first to predict it would be broken and now it has:

David Cameron has just said that only spending restraint will defuse Labour’s borrowing bombshell and afford real, sustainable tax cuts.

11.20am, Key highlights of speech:

The scale of Brown’s borrowing bombshell: "Gordon Brown is talking about borrowing an extra £30 billion. That’s a £30 billion Borrowing Bombshell – and let me tell you what it would mean. An eight per cent rise in income tax. Or a six per cent rise in VAT. Spending priorities shifting from new schools to educate our children and more police officers to keep our streets safe to servicing the growing interest on our debt. Gordon Brown knows that borrowing today means higher taxes tomorrow. If he doesn’t tell you that, he is deliberately misleading you."

A borrowing binge may not even work: "It’s not just that embarking on a government borrowing binge to pay for tax cuts or spending increases is dishonest and unfair. There is little evidence that it will actually work. In Japan they continually tried to kick-start their economy by repeatedly pushing through an unfunded fiscal stimulus. Between 1992 and 2002, Japanese government net debt grew by fifty-eight percent of GDP. Yet, over the same period, their economy grew by only nine percent – that’s less than one percent a year. The result was a ‘lost decade’ of stagnation, a crippling debt burden, and a landscape littered with endless – and embarrassing – white elephant public works programmes."

A promise of honesty: “I want to be honest about the problems we face, and how we will overcome them. I have been honest with people about the scale of our social problems – and the long, tough road we have to take to fix them. And now I want to be honest with people about the scale of our economic problems too. This means saying things that are not immediately popular. That we can’t afford a massive tax giveaway paid for by a borrowing binge. That we can’t afford a spending splurge. It means arguing for things that are difficult.  For prudence, not giveaways."

We will no longer match Labour on spending: "taxes will need to rise in the future. Without such restraint, the borrowing bombshell will turn into a tax bombshell. And if Mr Brown cuts taxes now, the bombshell will be even bigger. Senior Labour figures have admitted as much, the truth begins to come out. Tony McNulty said any outstanding balance “may need to be found by taxation”. Peter Mandelson admitted they would have to make some form of “structural adjustment in the years ahead”. And Alistair Darling warned that “at some stage you have to pay for it”. I think this is the wrong course for Britain. We need change – we need change to defuse the borrowing bombshell, to start living within our means, and to set us on the path to permanent tax cuts in the future. So, I can announce today that Labour’s economic mismanagement makes it vital for the long-term health of our economy that we set a new path for restraining the growth of spending. That means for the year 2010-2011, we need change, not more of the same. That means reducing planned government spending growth, and not matching Labour’s spending plans."

The overall message: "Today it is our duty to set out an alternative course for the immediate priority: protecting people from Labour’s recession, and ensuring that the recovery comes as quickly as possible. A vital part of that will be sticking to our commitment to fiscal responsibility. Not spending money we haven’t got. But saving it to help people through tax relief. Not borrowing money on the nation’s credit card. But getting a grip on public spending and making sure Britain starts living within its means. That’s the only responsible way to get our economy back on the path to recovery. And that’s the only long-term, sustainable way that we will reach the low tax, low debt economy that the people of Britain – after years of putting up with Labour – not only demand, but truly deserve.”


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