Tories promise £35bn spending cutback

Link: FDs say Howard’s policies pose threat to Blair

Shadow chancellor Oliver Letwin said Gordon Brown’s borrowing to pay for extra expenditure on key services could only result in taking more money from the public.

But Labour MP Jim Cousins, a member of the House of Commons Treasury Committee, dismissed the proposals: ‘They just don’t add up. They have got not credibility.’

Letwin denied he would ‘slash’ vital services if he entered 11 Downing Street and made clear that he would invest just as much money in the National Health Service and education as those planned by the current government.

The savings would come by cutting waste, bureaucracy and civil service numbers so that the proportion of national wealth consumed by government fell.

In a keynote speech to the Bow Group in London, Letwin warned that Gordon Brown’s spending plans were building up a significant structural deficit in public finances which would inevitably result in ‘significant tax rises’ if Labour was re-elected.

He promised that a Conservative government would gradually reduce the share of national wealth consumed by public spending by ensuring that it grew at a slower rate than the overall Gross Domestic Product.

Over six years the Conservatives would reduce the proportion of GDP spent by government from 42% to 40% cutting around £35bn a year from the Labour government’s projections.

This would eventually eliminate the deficit and, ultimately, provide a firm basis for sustainable medium term reduction in the burden of tax.

Although he would not go into detail, Letwin indicated that this could open the way to income tax cuts under the Tories in the next few years.

Letwin promised to match Labour planned increases in spending on health and education and to restore the link between pensions and earnings rather than prices.

He would freeze spending on other departments such as defence and transport and freeze civil service recruitment cutting the Whitehall workforce from 500,000 to 400,000 over ten years.

Letwin said: ‘I hope to be able to cut taxes in the early years. But I cannot be certain. That will depend on the amount of money we have to spend addressing any structural deficit we inherit from Mr Brown – and, of course, on unpredictable cyclical effects.

‘But I can say, and I do say, that by setting government spending on a track which should gradually across the cycle reduce the share of GDP spent by the state, the medium term expenditure strategy provides a firm basis for sustainable medium term reductions in the burden of tax.’