Howard promises £4bn of tax cuts

Michael Howard committed his party to "modest" tax cuts of £4bn yesterday and insisted a Tory government would protect key public services and reduce taxation.

The Tory leader said £23bn of the £35bn of savings identified from government "waste" would be spent on key services. Some £8bn would be used to reduce government borrowing and avoid tax increases, leaving £4bn to reduce taxes for "hard-working families and hard-pressed businesses."

The long-awaited tax cuts, to be included in the Tories' first Budget after the general election and take effect in April 2006, will disappoint right-wingers hoping for bigger tax cuts to put "clear blue water" between them and Labour.

The £4bn amounts to less than 1 per cent of the £567bn a Tory government would spend by 2007-08, £12bn less than Labour. The Tories would allow public spending to grow at about 4 per cent a year, just below the 5 per cent increase planned by Labour.

Although the difference between the two biggest parties is relatively small in historical terms, both will insist they offer a clear choice as tax and spending looks certain to become a crucial battleground at the election expected on 5 May. With the Tories, Labour and Liberal Democrats all holding press conferences yesterday, it appeared that the campaign had already begun.

Oliver Letwin, the shadow Chancellor, admitted the proposed tax cuts were modest but said an incoming Tory administration would need to reduce borrowing because of the "black hole" in Labour's spending plans. He said the Tories would disclose which taxes would be cut shortly before or after the Budget in March. The leading options include income tax reductions for people on low and middle incomes and lower inheritance tax and council tax.

The Tories have claimed they would match Labour's budgets for health, schools, transport and overseas aid and spend more than Labour on the police, pensions and defence. But they would cut sharply the budgets of departments such as Culture, Work and Pensions and Environment.

Mr Howard said: "There is clear choice at the next election: more waste and higher taxes under Tony Blair or value for money and lower taxes under the Conservatives. No one has to take us on trust. What we promise we will deliver. Our proposals are reasonable, responsible and achievable."

Alan Milburn, Labour's election co-ordinator, called the Tory plans "desperate measures from desperate men" and said it would mean deeper spending cuts than Margaret Thatcher ever contemplated.

The proposed savings in what the Tories called "non-priority areas" include axing 168 public bodies and 235,000 civil service posts; scrapping regional assemblies and the planned Supreme Court and ending the Small Business Service and the New Deal for the jobless.

Meanwhile the leader of the biggest union has said Tony Blair should step aside and make way for Gordon Brown. Dave Prentis, general secretary of the public servants' union Unison, said he thought the Prime Minister had gone back on a deal to step back and let the Chancellor take over.

Mr Prentis told Scotland's Daily Record newspaper: "There comes a time when there will be a change of leader. And it is right we do renew ourselves. We do need a real timetable for changeover."