Thatcher's call for tax cuts rocks Cameron

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David Cameron is facing renewed pressure over his economic policy as it emerged that Baroness Thatcher of Kesteven has called for tax cuts.

According to a blog on The Spectator magazine's website by its political editor, Fraser Nelson, the former prime minister told him "a few months ago" that "you can't have stability without tax cuts".

Her comments are at odds with Mr Cameron and the shadow Chancellor, George Osborne, who have repeatedly rejected calls for them to outline firm plans for tax cuts before the next general election.

They insist they will not put tax cuts ahead of economic stability and have pledged to "share the proceeds of growth" between spending on public services and reductions in taxation.

Lady Thatcher infuriated Conservative high command earlier this month when she accepted an invitation to tea with Gordon Brown and posed for photographs with the Prime Minister outside No 10.

Yesterday senior Conservative sources were at pains to downplay any suggestion of a rift with the former prime minister.

They insisted that "she has said many, many times that there must not be tax cuts without economic stability" and highlighted her decision to increase taxes after her 1979 election victory. One source said: "Obviously there is agreement that there must not be tax cuts before economic stability."

But contributors to the website backed Lady Thatcher's stance.

One contributor said: "Of course, Lady Thatcher is correct. I hope she says something similar during the conference. Cameron is as good as finished."

Another said: "It is a statement of the obvious. Thank you, Margaret, for saying it."

But a third wrote: "She and, more importantly, her advisers need to stop undermining her successors."

Philip Hammond, the shadow Chief Secretary to the Treasury, insisted that tax cuts could come in the longer term under a Conservative government.

Mr Hammond told GMTV: "Tax cuts will come in due course through sharing the proceeds of economic growth. That's our policy and that's the way that we will over time sustainably deliver tax cuts along with real terms increases in public spending."