Today we conclude the Next Steps Series that began on Monday.


Alistair Darling and Gordon Brown are widely expected to announce a package of tax reliefs.  The package will have three aims:

  1. To speed Britain’s recovery from recession;
  2. To help small businesses and the low-paid (the two likeliest beneficiaries);
  3. To put the Conservatives in the tricky position of opposing tax cuts.

You can be sure that objective three is at the front of Mr Brown’s mind.  He wants to sow disunity in Tory ranks and he also wants to frame a contrast between Tory tax cuts for the rich (inheritance tax) with Labour’s tax cuts for "hard-working families".  How should the Conservatives respond?  Iain Martin has learnt that "George Osborne’s advice is to oppose it on the grounds that Brown and Darling would be doing it with borrowed money and that it will probably be a 10p tax style con."

That’s not an unreasonable position.  Unlike Iain, Fraser Nelson and Andrew Lilico, ConservativeHome believes that the Conservatives are moving towards an economic policy that is politically credible.  The Tory message that Britain must live within its means and tighten all belts is one that will play well with middle England.  It isn’t sexy but we predict that it is the political equal of Labour’s stance of policy activism.  Further than that: if the Tories succeed in communicating the idea that Labour’s borrowing is out of control then Brown is politically toast.

Having said that, however, the Conservatives will be in a better position if they are able to oppose Labour’s irresponsible tax cut plan with a responsible Conservative tax cut plan.  If Labour intend to finance their tax plan with extra borrowing we should put forward our own tax relief plan and it should be funded by tighter control of public spending.

Matching Labour’s spending plans has been the biggest strategic mistake of the Cameron-Osborne leadership.  The current economic crisis can be used to wriggle free from that pledge.  Labour plan to increase discretionary spending by more than 2%.  A tighter settlement could be used to force the public sector to tackle its wastefulness (Dan Hannan seeks a war on the quango state) and can be used for economy boosting tax relief.  We certainly believe that hard-pressed businesses and families will make better use of every pound that is given to them and taken away from Whitehall.

The Tory tax cut plan does not need to be as big as Labour’s (although there is no reason why it couldn’t be larger if we adopted a sufficiently hawkish approach to spending) but it’s vital that – in addition to existing pledges on a council tax freeze and VAT holiday – we join Barack Obama, John McCain, Nick Clegg and Gordon Brown in offering our own tax relief plan.  You don’t beat something with nothing.

Step 7/10: Prepare for next year’s European Elections

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