This was revealed in yesterday’s speech on Conservative plans for an arctic freeze on all forms of public spending outside education and health.
He said there was evidence that a combination of avoidance reduction and increased economic activity can produce counter-balancing increase in receipts as under the Thatcher government.
But he dismissed such ‘bonuses’ as unpredictable and to be used as a basis for further tax cuts not for financing deficit expenditure.
Letwin ruled out a tax cut pledge but stressed this remained his aim once public expenditure had been brought back under control, starting by attempting to reduce specific types of tax showing most signs of generating avoidance and of reducing economic activity.
Attempting to usurp chancellor Gordon Brown’s record for ‘prudence’ he pledged: ‘A Conservative government, if elected at the next election, will not take risks with the public finances.’
Letwin said his freeze would start with a ban on replacement civil service recruitment with a zero cash increase across all but the two excepted departments for two years followed by a 2% cash – zero real terms – growth for the remainder of the strategy period.
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