Tax cuts at heart of Tory campaign

Michael Howard today put a pledge to cut spending and the size of the public sector at the heart of the Conservative party's economic plans.

Launching the Tories' economic manifesto, he said: "Government is too big and it is spending too much, wasting too much and taxing too much."

His statement came days after shadow chancellor Oliver Letwin responded to Labour's "lie" that the Conservatives would slash spending by saying that the party would spend more if it won power. In a foreword to the new mini-manifesto, the Opposition leader emphasised the traditional Tory theme of getting government off the backs of companies and families.

"If Mr Blair wins a third term, he would go on spending and wasting people's money - which he would pay for with another round of stealth taxes," Mr Howard said.

"We must give taxpayers value for money; control spending so that taxes do not go up again; reduce taxation and rebuild our pensions and savings."

The launch of the Tory economic framework comes before firm pledges, due within a fortnight, of specific tax cuts for pensioners and families totalling ?4billion.

The Tory document, launched by Mr Howard and Mr Letwin, accepts Gordon Brown's decision to give responsibility for interest rate decisions to the Bank of England- - but says they will go further-by making the Bank fully independent in future to prevent any government interfering with interest rate decisions.

It pledges action to encourage people to save more and borrow less, moves which will be used to stabilise the economy.

Personal savings have slumped from nearly ?10 for every ?100 earned to just ?6 since 1997, it says.

It claims that without action to cut government borrowing and avoid tax rises, the country will be

at risk of losing its place in the world league table.

Britain had already fallen from fourth place to 11th in the competitiveness table.

"At a time when developing economies like China and India are contributing to the toughest competitive conditions Britain has ever faced, Mr Blair is taking our economy in the wrong direction - with higher taxes and more regulation," it claimed.

The manifesto confirmed earlier announcements of a tax cut for pensioners, giving some

3.8 million over-65 households a right to up to ?500 off their council tax bills.

It gave no clues to the other tax cuts promised by Mr Letwin. These are expected to include a cut for middle to high earners by raising the 40p tax band threshold and a cut for low-income families by raising the lower band threshold.

Mr Letwin is also considering cuts in stamp duty or inheritance tax.

Mr Howard hopes the emphasis on creating stability will help restore the Conservatives' reputation for economic management which was virtually destroyed in the Black Wednesday currency crash of 1992.