Andrew Grice: The Week In Politics

Cameron's cat and mouse tax strategy lands him and Osborne in the lion's den with the Chancellor
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The Independent Online

In a fascinating foretaste of the battle at the next general election, David Cameron and Gordon Brown locked horns over tax and spending this week. But it was not the fight the Tory leader intended to have as he worked out his strategy for handling a year-long inquiry by his party's tax reform commission.

Mr Cameron and his shadow Chancellor, George Osborne, knew the commission, chaired by the Thatcherite former cabinet minister Lord Forsyth, would propose sweeping tax cuts. They resolved to turn that to their advantage by rejecting the demands, saying economic stability must come before cuts. Although the Tories deny looking for their "Clause IV moment," some believe privately that taking on the right-wingers over tax cuts is just that.

Mr Cameron's carefully-laid plans were derailed on Wednesday by a mistake at Tory headquarters, where someone inadvertently put the Forsyth report on the party's website a day before it was due to be published. A few doors away in Victoria Street, Westminster, a Labour official was browsing the Tory website when he spotted the Forsyth report. Patrick Loughran, Labour's head of policy, and a rising star, knew it was gold dust and rang Mr Brown's political advisers at the Treasury, who barked: "Print it off - and bring it round here quickly!"

It took Mr Brown only a few minutes to digest the 176-page report between back-to-back meetings about next month's pre-Budget report. He ripped out the summary page, showing how the Tories could reduce taxes by £21bn, declaring it "the most regressive package of tax cuts I have ever seen". He ordered his right-hand man Ed Balls, the Economic Secretary to the Treasury, to the television studios at Millbank, Westminster, to leak the Tory report to the broadcasters and launch a pre-emptive strike against it in interviews. An exuberant Mr Balls obliged, saying the "same old Tories" would need massive cuts in public services to finance tax cuts "for the few, not the many".

So, instead of having a battle with his party's Thatcherite old guard, Mr Cameron found himself in the headlights of a political bulldozer called Gordon Brown. The Chancellor, who should have been on the margins of an internal Tory debate, found himself dictating the agenda. He should have been playing away but found himself with an easy home game. The last two general elections have been dominated by the choice between Labour investment and Tory cuts, Mr Brown's favourite "dividing line".

The Tories did their best to recover. When the report was finally launched the following day, Mr Osborne insisted more clearly than ever that the party would not offer uncosted, upfront tax cuts at the next election. But the media was less interested on "day two" of the story, and the Tories had largely muffed their opportunity.

It wasn't just the cock-up at Tory HQ that made it a bad week for the Tories. The Cameron-Osborne line of "no tax cuts" is right: people want public services to take priority over tax cuts and do not believe they can have their public spending cake and eat tax cuts at the same time. They didn't even believe the Tories would deliver their promises of £8bn and £4bn of tax cuts at the last two elections.

The Tory leadership has got the message but it is sending out too many fuzzy messages on tax when it needs a crystal-clear line to convince the public it would not cut public services - a perception that may have been reinforced by the Brown-Balls attack.

At the same time as saying there would be "no upfront tax cuts," Mr Cameron and Mr Osborne said they would raise green taxes to reduce taxes on families and jobs. But they couldn't say how they would tax "carbon emissions and pollution" and ran a mile when options were put to them. In any case, the revenue from green taxes would be small and, by definition, they might yield less than expected if people gave up their cheap flights and gas-guzzling 4x4s.

Mr Osborne suggested he would abolish the tax on share transactions at a cost of £3 to £4bn. But it is not official policy because he can't say how it would be funded. True, the half-promise has gone down well in the business world, which may be tiring of Labour and is relieved that the country has an effective opposition at last. But, to put it crudely, businesses don't have votes. Removing stamp duty on shares might well help people's pensions. But ordinary folk might well regard it as the "same old Tories" helping their rich friends.

It seems that the Tory leadership felt the need to send a reassuring signal to the party faithful they are still tax-cutters at heart. At the same time, shadow ministers hint at higher spending on hospitals, defence, prisons and pretty much everything else. Yet the Tories also run a campaign portraying Mr Brown as the NHS axeman with a giant pair of scissors - while handing him the ammunition to attack "Tory cuts".

I suspect the public will be confused by the mixed Tory messages. They don't add up to a coherent strategy and, for all the undoubted progress made since Mr Cameron became leader, reveal the inexperience of his team.

In contrast, the week gave us a glimpse of an experienced and ruthless Brown machine, and a reminder that the Tories will underestimate its power at their peril.

a.grice@independent.co.uk

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