If money does make the world go round, then, in Britain at least, it is the government that largely determines the speed of that rotation. Some 42 per cent of national income consists of public spending. That is a very, very substantial sum and one which politicians of all persuasions should wish to see reduced by the end of the decade. The burden also means that the notion of tax cuts being “unaffordable” or “implausible” is itself ludicrous. It is ridiculous to contend that state expenditure is being managed in such an optimal manner that it would be impossible to deliver £4 billion in tax reductions.

The Conservatives yesterday unveiled the latest instalment in their tax programme. It consists of a cut in tax on savings for pension provision. As a policy it might not be particularly glamorous but it is undoubtedly worthy. It tackles a number of difficulties — the tax burden, a declining savings ratio and the need to prepare for retirement. It is an intelligent suggestion. Indeed, it is somewhat better in that regard than the first Tory tax cut produced for this campaign, a 50 per cent council tax discount for all-pensioner households up to £500, which while designed to be populist is essentially an old-fashioned election bribe.

The Tories have identified an important issue. While the tax demands placed on the poorest quarter of the population have possibly eased under Gordon Brown, and the richest quarter seem to be doing well enough to be relatively ambivalent on tax, there are many in the middle who rightly sense that their real incomes are being slowly eroded. The political task for the Conservatives now, with only £1 billion left in their self-imposed £4 billion purse, is to come up with proposals that will capture attention.

It may be, however, that this policy is a longer-term investment than Michael Howard would care for. Opinion polls are notoriously bad at picking up what voters are truly thinking when it comes to taxation. They missed, for example, the extent of electoral concern about tax that existed in 1992. In this contest, though, it does not look as if the Conservatives can force tax on to the agenda as firmly as they aspire to. It will undoubtedly move some votes but probably not as many as Mr Howard would wish.

This is, perhaps, because it is an election too early. Memories of the huge tax rises imposed by the Conservatives after they won their fourth term have not disappeared. A number of voters are beginning to feel nervous about their economic status but, for the moment, they are inclined to the rather strange view that tax cuts would be a risk and not a welcome reward for their endeavours. And for a tax-cut strategy to pay maximum dividends, it has to be part of a broader and compelling story of how a Conservative administration would provide both smaller and smarter government. Mr Howard and his team have smartened up, but are not yet smart enough.

This may not be true come 2009 or 2010. If state spending at that point is 42 per cent (or more) of national income, then the electorate, correctly, will be far more restless. The Labour manifesto last week referred to a desire to continue to make “targeted tax cuts” when possible. If Tony Blair secures a third term, those cuts should not be too targeted or that infrequent. If they are insufficient, Labour will not only be living on money borrowed from you, but on borrowed time.