Andrew Grice: 'Vote Tory for tax rises' – it's not as daft as it sounds

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"The Tories should never do sex, drugs or popular culture," the Tory frontbencher told me with a rueful smile. "It always goes wrong." He was referring to Chris Grayling, the shadow Home Secretary, who likened conditions in "many parts" of Britain's cities to the drug and crime-ridden Baltimore portrayed in the brilliant American television series The Wire.

My Tory informant was right: Mr Grayling's speech has rebounded on him. He has upset the police in Manchester, where the Tories hold their annual conference in October, by claiming he witnessed an "urban war" involving gangs when he joined them on patrol this summer. The police say he did not see any serious crime. Mr Grayling, an attack dog who would need to be a different animal as Home Secretary, has clarified his remarks: he was not, he insists, claiming Moss Side was the same as Baltimore.

His intervention was not a one-off. The Tories dubbed this their "Broken Britain" week. Their timing was good: the week saw the release of official figures showing that more than one in six people lives in "workless households", the highest level since 1999.

The Tory offensive was more than a bit of headline-grabbing in the political close season. There are concerns among the cabal of Cameroons who run the party that it has become too focused on a single issue – the economy – and too associated with a single policy – spending cuts. I'm told the plan for the Manchester conference is to devote a day to "fixing our broken politics", another to "rebuilding a broken economy" and a third to "mending our broken society".

In a way, Mr Cameron has gone full circle. Before the economic crisis, his goal was to transform "society" in the way that Margaret Thatcher revitalised the economy. Then the unexpected global crisis meant that the economy had to take priority; voters would expect nothing less. Now some Tory strategists believe rebalancing is needed: although the public knows that spending must be cut, the endless speculation about "Tory cuts" could revive fears that the "same old Tories" were still the "nasty party," undoing Mr Cameron's successful rebranding work.

I detect the hand of Steve Hilton, Mr Cameron's chief strategist, who has returned from a spell living in California and has always been keen on the "broken society" message. Although Mr Hilton kept in close touch by phone and email, during his absence Mr Cameron's other influential backroom adviser, his communications chief Andy Coulson, recommended an "it's the economy, stupid" focus in the recession, on the grounds that voters were interested in little else.

Of course, the need to curb spending to balance nation's books makes it harder to tackle social problems. Although not every problem needs money thrown at it, increasingly sceptical voters know that they can't have their cake and eat it. Similarly, the Tories' claim to be the true "progressive" party, designed to woo natural Liberal Democrat supporters, will grate if all the Tories are associated with is not Mr Cameron's three-pronged mantra of "NHS" but "cuts, cuts, cuts".

But there would be little low-hanging fruit for an incoming Tory Government to put in its cuts basket. Tory welfare plans, still being drawn up, to tackle Labour's "dependency culture" may mean upfront costs. But where would the money come from?

There is a growing recognition among shadow Cabinet ministers that, if they win power, spending cuts could only be half the picture, as they would also need significant tax rises to fill the black hole in the public finances. That is why Mr Cameron and George Osborne won't rule out tax increases.

The big debate among the Tory high command now is whether to announce some tax increases before the general election. Mr Cameron is reluctant to unveil a detailed "shadow Budget". But there appears to be growing support for some tax rises to be disclosed, in line with the Cameron-Osborne promise to be "honest" with the voters, while portraying Gordon Brown as "in denial" about the need for cuts (an attack the Prime Minister will try to head off by acknowledging the need for big savings).

Announcing tax rises for Middle Britain before the election would be high risk. Tory traditionalists would hate it. They want tax cuts. But it could bring high rewards. The tax increases would be blamed on Labour mismanagement. And, if the deficit were brought under control, the Tories could fight the election after next on a manifesto based on tax cuts. It could be an attractive strategy.

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