An adviser to David Cameron yesterday proposed spending cuts of £75bn a year to tackle the crisis in the public finances and said the Conservatives should abandon plans to raise taxes.
Lord Forsyth of Drumlean, a former cabinet minister who chaired Mr Cameron's policy commission on tax, said: "On the crisis, it seems to me that we need to be able to reduce the overall level of public expenditure over a parliament by about £75bn [a year]. This is not going to be easy stuff."
He is the first senior Tory to put a figure on the scale of the spending cuts the party might need to make if it wins power. So far, the Tories have identified only about £7bn of savings even though they have pledged to reduce the deficit "further and faster" than Labour.
Lord Forsyth, a Thatcherite former Scottish Secretary, said: "Taxes should not go up. Part of the problem is that taxes are far too high. The Government is taking far too much. If we continue like this ... we are actually going to destroy our economy. We have to face up to this and make these reductions."
Later he added he hoped that the cuts might be lower than £75bn a year by the end of the next parliament because of economic growth. He said: "There is going to have to be a reduction in the size of the public sector in order to create that growth. But tax is also far too complex ... it is also extremely unfair. People on the lowest incomes are paying the highest marginal rates of tax."
His comments were seized on by Labour. Liam Byrne, the Chief Treasury Secretary, challenged the Tories to say if they signed up to the £75bn cut. He said: "Last week, George Osborne gave a nod and a wink about cutting spending but won't be upfront about what services he will cut. Now David Cameron's adviser on tax says the Tories should go way further and cut £75bn from annual spending by the end of the next parliament – far beyond our plans."
The Tories will insist Lord Forsyth was not revealing a hidden agenda. Mr Osborne, the shadow Chancellor, plans to use tax rises to finance 20 per cent of his deficit reduction plan, with the rest met through cuts. Although no final decisions have been taken, it implies annual cuts of £46bn and tax rises of £11bn.
Lord Forsyth's remarks came at a conference staged by Conservative-Intelligence about the Tories' manifesto and priorities. Michael Fallon, the senior Tory MP on the Treasury Select Committee, also called on his party to embrace deeper cuts. He told the conference: "I would expect the manifesto to be much more realistic than we have been hitherto about the size and scope of public services we can afford." He added: "The emergency budget [within 50 days of the election] will be the crisis budget. We can't afford for the crisis to build up. We can't wait till 2011."
Mr Fallon, a former minister, predicted that the Tories would axe immediately "large capital projects" and "some frothy departmental expenditure" such as outside consultants, quangos and NHS bureaucracy.
Doubts among senior Tories about Mr Cameron's proposal to reward marriage in the tax system surfaced yesterday. A ConservativeIntelligence guide to the Tory manifesto by Tim Montgomerie, editor of the ConservativeHome website, predicted that Kenneth Clarke, the shadow Business Secretary, might try to veto the proposal in the cabinet. It said: "Ken Clarke brings charisma and experience to an untried team. He may also be Mr Veto."
Friends of Mr Clarke believe he would not rock the boat. However, he said before returning to the Shadow Cabinet a year ago: "I got rid of the married couples' allowance [when I was Chancellor]... I don't think it's anything to do with politicians whether you [get married]. My view of Conservatism is that it's not for us to tell you [what to do through] the tax system. This is social engineering and when I joined the party we weren't in favour of it."
Tories and tax: Three differences of opinion
Howard Flight
As shadow Chief Secretary to the Treasury, shortly before the 2005 general election, he told a Conservative campaigning group meeting that in office the party could make bigger spending cuts than they were promising in the manifesto. The meeting was secretly recorded. Tory leader Michael Howard withdrew the party whip from Flight, and announced he was no longer a candidate. Five years later, however, Flight is back on the "A-list" of Conservative Party candidates.
Oliver Letwin
During the campaign for the 2001 general election, Oliver Letwin, at the time also shadow Chief Secretary to the Treasury, is believed to have told the Financial Times his party could knock £20bn off taxes in comparison to Labour by 2006. He received a slapdown from then leader William Hague, and went into "hiding" for the rest of the campaign. Now chairman of the Policy Review, a Shadow Cabinet post created in 2005 by David Cameron, whom he backed for the leadership.
Kenneth Clarke
In March last year, shadow Business Secretary Kenneth Clarke appeared on television on Sunday lunchtime to say Conservative plans to raise the inheritance tax threshold to £1m was no more than an "aspiration". The party was thrown into a state of confusion, Clarke went incommunicado for several hours, and a statement was rushed out saying the commitment would be honoured. Clarke was privately rebuked by David Cameron, who told voters: "A promise is a promise."
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