Comment central: what will the Lib Dems do?

David Cameron yesterday dropped his pledge to match Labour spending to give himself more leeway for tax cuts at the general election.

The Conservative leader believes that voters will turn against Gordon Brown’s attempt to spend his way out of recession on borrowed cash and reward Conservative responsibility, an official said.

Mr Cameron’s gamble came as the Conservatives’ poll lead over Labour continued to fall. Yesterday an Ipsos/MORI survey put their lead at three percentage points, the lowest for months. It revived Labour talk about the potential of a 2009 election, with some MPs saying that the party has a better chance of winning an election during a recession than when the country is emerging from one.

Ministers tried to undermine Mr Cameron’s move yesterday by claiming that they had found billions of pounds of extra savings in Whitehall running costs. The money — up to £5 billion a year — will go either to frontline public services or to helping to constrain the borrowing surge.

Mr Cameron said that Labour’s “economic mismanagement” meant that Britain could already not afford planned increases in spending on public services beyond 2010. Mr Brown’s package of tax cuts and increased spending, expected next week, would worsen an already “unsustainable” budget deficit and saddle households with tax rises years into the future, he said.

The Tory leader found himself at odds with business leaders, who called for a tax-cutting stimulus in the Pre-Budget Report on Monday, while he continues to insist that he will oppose unfunded tax cuts. The Institute of Directors said that £20 billion should be slashed from tax bills through a 3p cut in income tax and a 4p reduction in corporation tax.

Mr Cameron said: “Let me put this as clearly as I can — unless we curb the growth of spending, taxes will need to rise in future. Without such restraint the borrowing bombshell will turn into a tax bombshell and if Gordon Brown cuts taxes now the bombshell will be even bigger.”

He acknowledged that opposing tax cuts now, on the ground that they would be funded from borrowing, would not be “immediately popular”. But he predicted that voters would, in the end, reward responsibility. “The right thing to do for the long term is not always the easiest thing to do in the short term,” Mr Cameron said.

Conservative sources said that their commitment to increase, in real terms, spending on health and overseas aid remained but that areas such as education, defence and transport could all receive less than currently planned under a future Tory government.

The Prime Minister said: “What everybody I talk to around the world is saying is that in response to the economic crisis that is facing all continents is that there needs to be a fiscal expansion. And the one group that seems to be standing against it, for purely dogmatic reasons, is the Conservative Party. People want help now. Families want help, businesses need help and that is the focus of Government — to stand in where there is a blockage in the marketplace to help families and businesses.”

Nick Clegg, the Liberal Democrat leader, accused the Conservatives of “economic madness”. “No one can predict the length and depth of this recession so making promises for two years’ time is foolish,” he said.

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