Letwin dashes hopes of early Tory tax cut

Shadow chancellor Oliver Letwin is to damp down hopes of early tax cuts under a Tory government.

In a keynote speech in London on Monday he will say the first priority must be to cut government borrowing, now heading sharply upwards. Only then, if at all, will there be scope for cuts.

Mr Letwin will seek to put clear blue water between a high-tax Labour Party and a low-tax Tory Party, warning that Chancellor Gordon Brown's policies will inevitably mean more increases.

Senior party sources today signalled there will be no firm pledge of immediate action to bring the burden down.

The cautious approach appears to mark a decisive defeat in the shadow cabinet for those pressing for a bold gesture on tax.

The party's joint chairmen, Lord Saatchi and Dr Liam Fox, were among a number pushing for a firm manifesto commitment.

Mr Letwin and others warned that the party risked being " crucified" by Labour charges that the tax savings would be found by slashing spending on hospitals, schools and other key services.

There was confusion earlier this month when it was reported that the Tories were planning a pledge to spend more than Labour on health in their first year, if elected. That was rapidly denied, but party leader Michael Howard has been under pressure to produce a settled policy with a clear message.

Mr Howard took a cautious line, in an interview with the Evening Standard last week, warning: "We won't offer tax cuts unless and until we can explain to people where we have found the money to pay for those tax cuts."

Mr Letwin looks likely to go further on Monday, warning that not only must the "black hole" in Mr Brown's budget arithmetic be filled but that the public services must be properly financed.

Today there were suggestions that the shadow chancellor could delay a final policy statement on tax until closer to the next election when, it was said, he might be able to hold out the hope for tax cuts later in a five-year term if his party won.

Lord Lamont, a former Tory chancellor, today pointed out that Margaret Thatcher came to power in 1979 offering the hope of tax cuts, but no guarantee.