Steve Richards: If the Tories are serious about power, they must resist these siren calls for tax cuts

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The Independent Online

Perceptions of the recent past can change rapidly. What happened is not always the same as what we choose to remember. This is a familiar theme at the theatre. A denouement can make us question what we thought we had seen in front of our eyes during the opening act.

In a similar way, unreliable memories are playing their part in the current febrile debate within the Conservative party about tax and spending, the pivotal policy area that will determine the outcome of the next election. In this case the opening act took place last autumn. The denouement, which we have not yet reached, will determine how serious the Conservatives are about being a credible alternative to the Government.

According to some Conservatives, last autumn was the period when their party finally got its act together, both in terms of substance and strategy. The narrative as they recall it goes something along these lines.

The shadow Chancellor, George Osborne, announced the abolition of inheritance tax on the Monday morning of the Conservative conference. With a wave of a wand the party became popular after a dangerously long period in the doldrums. A tax cut did the trick. For the rest of the autumn the leadership strode on confidently, announcing a range of initiatives that captured headlines for months. Those who look back fondly to this phase ask with increasing frustration why the pace has slackened. They yearn for more tax cuts and bolder policies that set the agenda once more.

But, as Cameron's more astute advisers recognise, the calls for a return to the glories of last autumn are based on dodgy memories. Act One was not quite like that. Here is what really happened.

Osborne made his announcement about the inheritance tax on the Monday. It was well received, but not ecstatically so. I chaired a packed fringe meeting with Osborne immediately after the speech. No one in the audience asked about the tax proposal. The following day most newspapers gave it the thumbs up but the wiser columnists, including some from the right, wondered whether the proposal for a flat rate tax on non-domiciles would raise sufficient cash, a highly pertinent question in the light of recent events.

Some also worried that Osborne had been rushed into making the announcement because of the prospect of an autumn election. I should add Osborne has always denied this emphatically, in which case there must be questions about the wisdom of playing an ace card two years before a general election.

There was no sense in the immediate aftermath of the announcement that the tables had turned. Instead senior Tories were still asking journalists fearfully about the chances of an early election. Then Gordon Brown made his first big error. He headed for Iraq, spinning an announcement about troop withdrawals that was not as dramatic as it appeared to be.

This is when the political mood changed dramatically, a change reinforced when Brown announced there would be no election the following weekend. The reasons he gave were unconvincing, a bleak context for Alistair Darling to announce his own proposals for the near abolition of inheritance tax, to be paid for by non-domiciles.

In other words, the Tories benefited from the Government's mistakes and responded to the opportunity that opened up with a calm agility. They did not spend the rest of the autumn launching headline-grabbing initiatives. I am told that only two serious policy announcements were made in those months, one on the environment, another on schools, and neither of them got much attention because of the Government's difficulties.

The tax cut played its part, but was only an element in the story. There is no guarantee that further tax cuts would have a similar impact, especially if Gordon Brown is able to lead for a bit in a calmer context than last autumn.

Indeed like all extraordinary dramas the one played out last autumn could still produce an unexpected twist. I am beginning to wonder whether the Tories will be the longer-term victims of those gripping weeks. For a lot of them tax cuts are like a drug. Give them a hit and they want more. Read the vivaciously influential websites such as ConservativeHome and Spectator Coffee House and it soon becomes clear the degree to which they want another hit soon, this time financed out of supposed spending cuts.

Such a move would blow apart the fragile credibility of an opposition party. This is not just for the obvious reason that Cameron and Osborne made great play of the fact that they would stick to Labour's spending pledges. There is a more fundamental reason.

It is much harder to cut public spending than some, or perhaps, most Conservatives realise. Gordon Brown's allies are monitoring speeches by Shadow Cabinet members and already they have recorded pledges to increase spending that amount to an additional £10bn.

Of course, this will be a much exaggerated figure (so were Tory claims about Labour's tax plans in the 1980s) but I am surprised how casually commitments are being made. Without paying excessive attention I have noted the Tories supporting the former military chiefs' call for more spending on defence and the police. The Conservatives propose to spend much more on a prison-building programme and there is talk (commendable in theory) of support for a high-speed rail line.

Once more we come across the old British conundrum especially acute on the right: the recognition that there is a need for civilised levels of public spending when faced with specific examples, but a horror in general at the concept of public spending.

For Conservatives this is a pivotal debate. For three elections they have claimed as if by magic they would cut taxes, slash public spending and improve services. They lost every time, a reversal of Labour's fortunes in the 1980s. I have read carefully the recent thoughts of the senior conservative MPs, John Redwood and Michael Fallon, on how the Conservatives could reduce the size of the state and offer tax cuts.

I am addicted to the ConservativeHome website where there is a similar campaign for tax and spending cuts. But I have yet to read tax proposals that differ greatly from those put forward at the last election when the party won fewer seats than Michael Foot managed for Labour in 1983.

They should listen to Ken Clarke, the John McCain of the Conservative party in the sense that he has broad appeal and yet alienates activists, who wisely insists that, in the light of the economic situation, there is no scope for tax cuts. If the Conservatives display inconsistency or unprincipled incoherence on this issue, the final act of a highly charged political drama will end in another election defeat, when the opening last autumn had appeared to promise so much.

s.richards@independent.co.uk

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