When I was a student I used to amuse myself by purchasing a magazine called London Labour Briefing. I loved the headlines. “Yes, the international banking crisis is sexist” was one of my favourites. You've got to love that “yes” at the beginning. “The progress of the class struggle in Bromley Ravensbourne” was another cracker. The author reported that it wasn't going well.

What made the publication such fun was the hermetically sealed little world in which the contributors lived - earnestly debating with each other, huddled together, undisturbed by either political or economic reality. It was particularly hilarious that they had no idea how hilarious they were.

Such behaviour is not, of course, confined to the Left. The Right is quite capable of it too. As anyone following the debate on Tory modernisation will be aware.

A couple of weeks back, for instance, Simon Heffer, of The Daily Telegraph, suggested it would be a vote-winner to make John Redwood Shadow Chancellor. After which he donned his Citizen Smith beret and went out on Tooting High Street shouting “Power to the People”.

Very entertaining. But sometimes the failure to get to grips with reality is merely irritating. And so it was last week with the reaction to the remarks of Andrew Lansley, the Shadow Health Secretary, on NHS spending.

I'd better start at the beginning. Just before Gordon Brown's aborted 2007 election campaign was supposed to start, the Shadow Chancellor, George Osborne, used these pages to announce his spending plans. He would, he said, match Labour until 2011. And after that he would seek to keep the rate of growth of government spending below that of the economy.

Some activists did not like this idea. They want spending to grow slower than Labour right from the beginning of a new Parliament. And they have been agitating against the pledge - and any extension of this pledge beyond 2011 - ever since. They have felt encouraged by stories, reported all over the place, that David Cameron and Mr Osborne disagree on the whole question.

Mr Osborne, these stories suggest, is more hawkish than Mr Cameron, wanting to promise early tax cuts and therefore avoid a renewed pledge. The inheritance tax coup shows the Shadow Chancellor's true colours.

Well, I hate to spoil the party, but these stories are wrong. There is no difference of opinion between Shadow Chancellor and leader. The matching strategy was Mr Osborne's and he is as resolute about it as his friend. There was some internal resistance to the inheritance tax policy but Mr Osborne had Mr Cameron's support and that turned out to be all he needed. He is convinced that his pledge on inheritance tax only worked politically because it wasn't an overall tax cut.

There's another reason that Mr Osborne and Mr Cameron agree. The alternative - tax cuts within the first two years of a Conservative government - is not simply politically daft. It is also hard to see how it could be promised economically.

The Tories have now fought two elections advancing an immediate cut in spending and short-term tax cuts. Twice this has been rejected by voters, twice it has come close to unravelling during the campaign. It is preposterous to suggest that the reason for this failure was that the party did not try hard enough to sell the package. That is up there at the “class struggle in Bromley Ravensbourne” level of fantasy.

The reason why the tax and spending came close to unravelling is that it wasn't very realistic. And Mr Lansley's remarks on health spending provide one illustration of why this is.

He has been widely pilloried for his observation that health spending will rise as a proportion of national income. “Lansley commits Tories to £28 billion of new health spending” ran the headlines, causing predictable horror in some sections of the Right.

But the interesting thing was precisely the opposite. Mr Lansley had not committed the party. He had simply observed that demographic and technological pressures were going to push up the need to spend money on healthcare to maintain standards. And though this statement is inconvenient, it is also true.

So what the Shadow Health Secretary has revealed is not that the Tories have agreed to big new spending, but that there are huge natural upward pressures on spending on top of anything new the party has agreed to. He has shown that a policy derided as soft - sharing the proceeds of growth between tax cuts and public spending - will, in fact, prove an exceptionally hard road to hold.

Of course the answer always comes back: then we need to reform health. And quite right too. But this won't cut bills. Any sensible decentralisation of health or education is going to cost more money before it begins to save anything. Tories need to make health and other public services more productive and more consumer-oriented but this will not reduce tax bills in the first Parliament.

It doesn't work simply to assert that billions have been wasted on an unreformed NHS. Just because more money hasn't made it better doesn't mean that the opposite holds.

Tories can save money, they can cut taxes, they can reform services, they can reduce government. But to believe that they can do these things all at the same time and all in the first years of a Parliament is like believing that the international banking crisis is sexist.

daniel.finkelstein@thetimes.co.uk

Times Recommends

• Fundamentalist brew: faith and power
• Big guns wheeled out for the marginals
• Wanted: new merchants of light