It's tax cuts or bust for the Tories

ROBERT JACKSON is an old friend of mine and was a valued Conservative MP. He is always very much the policy wonk rather than a man to set the Chamber alight. Bruce Anderson once wrote memorably of him that every party needs one or two Robert Jacksons but certainly no more.

It is sad that he should leave the Conservative Party and that he should trash his constituency supporters just at the point he was about to stand down at the General Election.

Apparently, unlike Gordon Brown, he thinks Tony Blair is a man to be believed. And not many voters will be impressed by the criticism that the Conservative Party gave inadequate support to Blair over Iraq.

Robert has also attacked his old party on the economy. Indeed his defection appeared calculated to undermine the Tories' long-awaited unveiling of their tax and spending plans today. Tony Blair will have been delighted. He has made it clear he intends to fight the election on the economy. In a formidable speech last week he strongly attacked the Conservatives.

The Prime Minister argued the biggest strategic shift in politics in the past 10 years is that Labour is now the party of economic stability and it is the Tories who couldn't be trusted on the economy. No doubt the Labour Party has done better than previous Labour Governments, but their much-vaunted stability could not have been achieved without the Tories' foundations.

And many of their boasts are over the top, such as their claim that this is the longest period of continuous economic growth for 200 years, which is simply untrue. For example, the economy grew every year between 1949 and 1973. I have never heard a Conservative spokesman make this point.

It is time the Conservatives abandoned their mea culpas, got off their knees and fought back. Otherwise they will go down to another big defeat.

The News of the World poll yesterday, showing the Conservatives still trailing by a considerable margin, comes as no surprise - so far the voters have not received a winning offer from the main opposition party. There is one obvious solution crying out to be heard - to put tax cuts at the heart of the next election.

Today, at long last, Oliver Letwin begins the fight back. For there is undoubtedly one area of the economy where Labour is highly vulnerable and that is taxation. Families are groaning under the burden of an extra £6,500 per year per average household since Labour came to power.

Almost every independent forecaster agrees taxes will go up further if Labour wins the election. According to Gordon Brown's pre-Budget plans, the tax burden will rise by 2007 to a level not seen in 24 years.

Why has it taken the Conservatives so long to join this battle? No doubt they wanted to be responsible, do their sums properly and make sure they had money to plug the Government's rising deficit. But they could easily have unveiled the 1992 tax bombshell posters that Maurice Saatchi, then an adviser to the Conservatives, designed, and which were so effective in showing the consequences of Labour over-spending.

Of course some Conservatives argue that tax cuts were a 'trick' of the Eighties and today the public want better public services. That is indeed what opinion polls say. But they also said exactly the same in the 1980s. Mrs Thatcher never believed the polls reflected honest answers, and she decided to do what she thought was best for the economy.

It is significant that even non-Tory publications like the Financial Times and The Economist have been urging the Tories to develop the small State lower taxation agenda. Much of the public has been longing for the same thing.

Millions of potential Tory voters in the South are aware of the shadow of inheritance tax that hangs over their houses. It seems harsh to tax people twice, once when they earn their money and a second time when they die.

Perhaps the most unfair tax of all, and the most potent ground for the Tories, is the starting point for the higher rate of income tax at 40%. Under Labour's Denis Healey in the 1970s a taxpayer had to earn 80% more than average earnings to pay a marginal rate of 40%. Today under Brown more and more people - 3.4m in total - are brought into this net. Head teachers and senior policeman pay the same top rate as partners in Goldman Sachs. This needs urgent attention.

Robert Jackson complained the Conservatives had dodged the issue of the smaller State, that is to say the Government would have to do less if taxes were cut. He also said the Conservatives had not shown how you could cut taxes and improve services.

But Oliver Letwin can demonstrate precisely and in convincing detail exactly both those things. Under Gordon Brown's plans the State's share of the economy is set to rise to 42%. By spending less each year, Letwin can achieve the smaller state and get spending back to the same proportions as 1997.

With the James Report, the Conservatives identified some £35bn of savings. They plan to plough two-thirds of those savings back into services. But the rest, about £12bn, is to be divided between reducing the Government's deficit, an urgent matter, and reducing taxes.

If I have any criticism of Letwin's plans it is that he is being too cautious in the amount of money set aside for tax cuts. But over a Parliament useful tax cuts will occur, and Labour's tax increases would be avoided.

Jackson also said that: 'Cutting waste is what you say when you are not brave enough to say we are going to do less.' That is a good point. But not all the James Report's savings are 'waste'. Substantial sums come from policy changes, such as having a proper immigration policy, or scrapping three of Brown's New Deal schemes.

If the Government's very own report, the Gershon Review, could identify £20bn of waste, it seems probable there is a lot more to be eliminated.

Other savings come from eliminating the extraordinary plethora of unnecessary bodies like strategic health authorities, and regional industrial development boards.

To me it was a revelation that you could save £2.8bn by abolishing the Office of Deputy Prime Minister. But that is a measure of how bureaucracy has gone mad under Labour. Net employment in the public sector has increased by half a million since 1997.

The Conservative Party needs a strong, distinctive voice. It needs self-belief and less handwringing. If it was more confident, more people would support it. Its tax plans announced today are long overdue, a careful step in the right direction.

Inadvertently, Robert Jackson may have helped his old party by drawing attention to the argument. One thing is certain - the more the focus is on tax, the more the Tories will benefit.