Kenneth Clarke, the Chancellor of the Exchequer, set about crystallising the scope for Budget tax cuts yesterday at a meeting of Treasury ministers and advisers at his country residence, Dorneywood, in Kent.
While some analysts say the case for cuts is weak because the public- sector borrowing requirement is running ahead of Treasury forecasts, there were growing expectations yesterday that the necessary scope for a cut of up to 2p in the basic rate of income tax, or its equivalent in other taxes such as inheritance or capital gains tax, could be found.
Mr Clarke is holding out hope that spending could be cut to below this year's control total of pounds 263bn, but Gillian Shephard, Secretary of State for Education and Employment, Stephen Dorrell, Secretary of State for Health, and Peter Lilley, Secretary of State for Social Security, are fighting against cuts in their budgets.
Ministers will assess the likely receipts from next April's sell-off of Railtrack, while the spending-cut axe is likely to be wielded heavily over Whitehall running costs. Mr Clarke is also expected to attempt to breathe more life into the Private Finance Initiative to reduce capital public spending.
The final balancing act between spending commitments and tax cuts will be hammered out at a Cabinet meeting early next month in advance of Mr Clarke's detailed announcements in the 28 November Budget.
At a private meeting with backbenchers on Thursday night, William Waldegrave, Chief Secretary to the Treasury, warned that tax cuts could only be delivered through cuts in public spending. MPs at the meeting urged the Government to resist calls from "Middle England" asking for help from the taxpayer for long-term care for the elderly.
Tory backbenchers are concerned that next month's Budget may be the last chance for tax cuts before the election is called, and some are hostile to suggestions that the social security savings limit should be doubled to pounds 16,000 before people have to pay for private care, or that nursing fees for the elderly should be paid by the state. Right-wingers especially want to see a drive for people to make their own provision for long-term residential care through private insurance.
A further demand that is expected to be brushed aside by the Chancellor is help from the public purse for home-owners faced with falling prices and negative equity.
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