Steve Richards: The Tories have had it easy too long

I cannot recall an opposition that has changed its approach to tax/spend so often

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Not surprisingly Peter Mandelson and other ministers leap on the latest shift in the Conservatives' economic policy making. Labour went so far as to hold a news conference to highlight David Cameron's flakiness in respect to his plans for spending cuts immediately after the election.

On second thoughts Labour's response is quite surprising. For years Cameron and George Osborne were allowed to say more or less anything and the dysfunctional Downing Street machine never challenged them. Apparently part of the conversation between Mandelson and Osborne when they met famously on a boat in the Greek sunshine two summers ago related to the lack of any Labour onslaught against Tory speeches. Over a glass or two Mandelson told Osborne that he thought a speech the Shadow Chancellor had delivered to Demos that August had been preposterous. Osborne gave Mandelson the impression that he could not believe his luck at the lack of any scrutiny from Labour, in respect to that speech or any other. Finally it seems Labour responds.

The trigger is the latest thoughts of Cameron and Osborne on their plans for spending cuts during the forthcoming financial year. Not so long ago their words on the subject were accompanied with something of a macho swagger. Osborne pledged an emergency budget during a conference organised by the Spectator magazine last year. This was a tactical mistake. Sir Geoffrey Howe as shadow chancellor made no reference to an emergency budget in the run up to the 1979 election even though he had written one.

Still Osborne's confident declaration highlighted the main divide between the parties over the timing and depths of spending cuts. But ever since the Conservatives adopted a tonal austerity their poll ratings have not been especially buoyant, considering they face a long serving government flailing amidst various economic and political crises while subjecting its leader to the occasional attempted coup.

Now Cameron and Osborne choose to sound less austere. They will make a start with public spending cuts, but they will not do very much at first. The emergency budget becomes slightly less of an emergency. They planned to climb Mount Everest and were intending to make a first big leap, but have opted for a little preliminary jog on the ground instead.

I am pleased they have chosen the jog. Before the tonal shift they gave the impression that cuts would be imposed indiscriminately on a frail economy that was still breathing because of the Government's hyper-activity. On one level their shift is bad news for Labour as it narrows the policy gap and Osborne's so called emergency budget looks less like an ideologically inspired attempt to terrorise the economy back into recession.

Nonetheless the oscillations in the Conservatives' position on the economy are unusual and a sign of weakness. I cannot recall an opposition that has changed its approach towards "tax and spend" quite so often. Here is a summary since 2005. When Osborne first became Shadow Chancellor he expressed an interest in flat taxes, a move that was described as too right wing even by the Economist magazine. The idea was dropped.

In his first conference as leader in 2006 both Cameron and Osborne made clear that economic stability was their priority and there was no scope for tax cuts. Within months they also pledged to stick with Labour's spending plans. At the following conference a tax cut became their headline grabbing priority, when Osborne pledged the near abolition of inheritance tax. Soon they announced that they were no longer sticking with Labour's spending plans either, and began to propose cuts in the middle of the recession.

Tax cuts moved even closer to centre stage as they pledged changes to help savers and married couples, although briefly they were moved to one side when Cameron admitted he "messed up" by saying that they were not committed to changing the marriage tax allowance. Now they move again. Tonally they implied significant cuts this summer. Now they imply tiny ones.

Admittedly they are functioning against the backdrop of the wildly unpredictable economic crisis, but even so the basic position of the other two main parties has not changed quite so often. Cameron and Osborne are astute operators with some first rate advisers, so it is one of the most interesting questions in politics as to why they have not been more sure footed on economic policy.

The main answer is easily overlooked and explains why I have an instinctive sympathy for both Brown and Osborne. Economic policymaking is nightmarishly difficult. The end result must be credible, popular and in tune with a party's values. It is very difficult to pull off all three. Internal critics can loftily propose a tax or spending cut here and there. Those at the very top must make the whole programme add up and be compellingly persuasive at the same time.

Even so I see no evidence that Cameron and Osborne have had the same ruthless discussions that punctuated the Blair/Brown phase in opposition. With a forensic persistence Blair and Brown asked what signals they wanted to convey with their tax and spend policies. If any policies contradicted the intended signal they dropped or revised them. They asked other questions. Did every policy consistently convey the message? Is everyone delivering the same message?

If Cameron and Osborne had held such fundamental discussions the pledge to abolish inheritance tax would have been dropped along with the promise to help married couples. The argument on public spending would have been fixed, either that the economy was so bad big cuts were required immediately, or that the recovery was so precarious, substantial immediate reductions were out of the question and they were sticking close to Labour's position. The option of adopting both policies at different points should have been dismissed with a Cameroonian wave of the hand.

They have had it too easy for too long. I suspect that is the other reason for the flakiness. Labour has commanded the stage with its attempted coups, the ongoing trauma of Iraq and the long list of other subjects that have highlighted and fuelled its deep identity crisis. But now Mandelson and others are paying attention. The belated stirrings of their opponents signal the start of a period in which the Conservatives will face intense scrutiny for the first time. I am not sure they are ready for it.

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