Tories accused over true scale of tax cuts

The Conservatives were accused yesterday of implying they would cut taxes by up to £18.5bn even though they will fight the election on a pledge to reduce them by only £4bn.

The Conservatives were accused yesterday of implying they would cut taxes by up to £18.5bn even though they will fight the election on a pledge to reduce them by only £4bn.

An analysis by The Independent shows that the tax cut options still officially "under consideration" by the Tories total £18.54bn. The ideas are posted on the Conservative Party's website, which says they may reduce or scrap a range of taxes despite the modest £4bn package announced by Michael Howard on Monday.

The Tories insist they never promised to implement all the options included in a series of consultation documents on tax. But Labour ministers pointed to newspaper headlines suggesting several taxes would be cut or abolished when the documents were published.

The party's website continues to publicise these ideas even though many of them are unlikely to be included in the final package to be announced before the general election. For example, the website is running a "news story" which begins: "Inheritance tax or capital gains tax could be scrapped or cut back under radical reforms being considered by the Conservative Party leadership."

It would cost £2.9bn to axe inheritance tax and £2bn to abolish capital gains tax - a combined total exceeding the £4bn allocated by the Tories for tax cuts.

Other options still being considered by the Tories include restoring dividend tax credits for pension schemes (at a cost of £5bn); cutting the rates of stamp duty on property (£2bn) and reversing a £340m tax on small businesses announced in last year's Budget.

The Tories have also floated two reforms of income tax - taking low-paid people on the national minimum wage out of tax (£3.7bn) and raising the income threshold for the 40p top rate from £36,165 to £40,764 (£2.6bn).

The £18.54bn of proposed tax cuts excludes council tax, which is likely to feature in Mr Howard's final package. He is also expected to spend some of the £4bn on changing income tax thresholds to help both the low paid and middle-income earners draw into the top 40p rate.

Small-scale reform of inheritance tax is also favoured by the Tory leadership, although it would stop well short of abolition. The Tories may decide to "spread the jam thinly" in an attempt to get the most impact from the £4bn allocated for tax cuts.

Paul Boateng, the chief secretary to the Treasury, said yesterday: "The Tories cannot find their savings, yet they claim they could increase spending, cut borrowing and cut taxes all at the same time. None of the Tories' sums add up. They can't even afford the £4bn of tax cuts they say they'll make, let alone the long list they have floated."

But a Tory spokesman dismissed Labour's criticism as "completely spurious". He said: "We have made it clear all along that we can't possibly do everything - at least at once. Michael Howard has been explicit about this. We have said we would introduce a limited number of modest tax rises for the simple reason that we are not going to promise anything we can't afford. The whole purpose of the exercise is to open up a debate so we can hear the views of people affected by these taxes."

Yesterday Mr Howard clashed with Tony Blair at Prime Minister's Questions when he challenged him to say whether Labour would stick to its 2001 pledge not to raise tax rates at the forthcoming election. Mr Blair replied that the promise had been kept but told the Tory leader to wait for the Labour manifesto.

Mr Blair reminded Mr Howard that he had been part of a government that broke an election pledge not to put VAT on fuel. "We will take no lessons in broken promises on tax from you," he said.

The Tory leader said: "Every independent expert ... says that this government is spending more than it is raising and a Labour chancellor would have to put up taxes.

"Why do you think they are all wrong?" he asked.