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David Cameron today suggested that a Conservative government could avoid the need for some of the tax rises planned by Labour by refusing the match the government's spending plans.
The Conservative leader said that having studied in detail the figures set out in the recent pre-budget report he could now say that he would not match Labour's spending plans from 2010.
In an interview on BBC Radio 4's Today programme, he argued that by adopting a tougher approach to spending than the government was planning, the Tories might be able to avoid taxes going up after 2010.
"That flows through into future years," Cameron said, referring to the impact of spending cuts.
"It will help us get back into a situation where we are not borrowing so much and where we do not have to go ahead, we hope, with the tax rises that Labour have announced."
Labour has said that taxes will have to go up after the next election. Anyone earning more than around £20,000 will have to pay more in national insurance, anyone earning more than £100,000 will pay more because of changes to tax allowances and there will be a new 45% income tax rate for those earning more than £150,000.
Although there is international support for the idea of using a "fiscal stimulus" to kickstart an economy in recession, Cameron said that he was strongly opposed to Brown's plans to increase borrowing even more now to fund short-term tax cuts such as the year-long cut in VAT.
Cameron's move came as a Populus poll in the Times showed that Brown and Alistair Darling have a nine-point lead over Cameron and George Osborne when voters are asked who they trust most to deal with the recession.
The Labour lead on this measure has increased by six points since the PBR, although when people are asked how they will vote at a general election, the Tories are still ahead of Labour, by 39% to 35%.
In his interview on Radio 4's Today programme, Cameron said: "I am desperately worried that this government is leaving the country in so much debt that in future generations we are going to have the public finances of Italy, and we are going to be paying this off for generations. I think they are making a massive mistake now."
Before the PBR, Cameron gave a high-profile speech in which he announced that he would no longer match Labour's spending plans from 2010-11. But in the PBR Darling, the chancellor, revised his spending plans claiming that he had managed to identify efficiency savings.
Today Cameron announced that, having studied the figures, the Tories have decided not to match Darling's revised plans.
Cameron cited the governor of the European Central Bank, Jean-Claude Trichet, who today said that additional borrowing by governments which are already deeply in debt may harm their economies rather than help them get out of the slump.
Trichet told the BBC: "It's important that the rules are respected. If you augment too much your own borrowing, you might be punished by markets.
"If you are at the limits of what you can do, you can lose more with absence of confidence and loss of confidence than you would gain from the simple channelling of additional spending."
Cameron said: "He is saying if you are borrowing more than 3% of your GDP - and remember we are at 8% next year - if you go on and do more of that, you risk undermining confidence. That's exactly my argument and that's why I think it is so important that people understand the nature of the choice."
Cameron also called for an early election.
"I know that opposition leaders always call for an election, but I think we really need one. None of this was in Labour's manifesto, and they are asking people to go ahead with a borrowing binge now that is going to load up taxes and debt for future generations.
"I want to stop that now and the only way to stop it is to have an election."
Cameron will give further details of his thinking in a speech to the London School of Economics this morning. He will say: "A very clear choice is emerging in British politics today.
"It is about how we deal with the greatest economic problem to confront this generation - the recession and the record level of public debt.
"Labour's response is to ignore the fact that we're already borrowing at record levels, deliberately borrow another £20bn for short-term giveaways today - and leave worrying about the debt until tomorrow.
"The Conservative response is to recognise that we cannot go on as we are: that when you're already borrowing so much it is wrong to deliberately borrow even more.
"Instead we should get spending under control to set our economy on a sustainable path. This is a very big and profound choice.
"I think everyone knows that fiscal responsibility is right for our economy tomorrow. My argument this morning is that it's also right for today."
- Conservatives
- David Cameron
- George Osborne
- Economic policy
- Tax and spending
- Alistair Darling
- Income tax
- Tax
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