Michael Brown: It's time for Cameron to challenge Labour orthodoxy
Published 10/10/2007 | 08:59
Alistair Darling delivered his pre-Budget report and Comprehensive Spending Review on ground set by the shadow Chancellor, George Osborne, at the Tory conference last week.
Mr Osborne struck a political blow when he claimed that this statement was not leadership but "followship". This was a pre-election announcement without the election.
Whether Mr Darling's copycat proposals relating to air passenger duty, measures to close private equity tax loopholes and the doubling of inheritance tax thresholds, will cut the ground from under the Tories' feet remain to be seen.
At first sight, however, there is no doubt that the Tories' conference proposals have set the political weather. In the longer term, Mr Darling may have neutralised, to some extent, those mouth-watering Tory policies.
But the public may now be in a mood to accept Tory claims that this sudden political cross-dressing by the Chancellor is just a cynical stunt. Mr Darling may have thought he was being clever by shooting the Tory fox. But the public mood has undoubtedly changed following the party conference season.
Mr Osborne will have to decide, tactically, whether to claim the credit for setting the agenda or whether to launch a full frontal assault on the overall strategy that threatens to increase borrowing and taxes against a background of darkening economic clouds.
On balance I think the Tories can be relatively relaxed that Mr Darling has stolen their clothes. It was always inevitable that Labour would respond to the Tory challenge on inheritance tax, air passenger duty, private equity and "non-doms" – even if there had been an early election.
But the broader picture still leaves the Tories in the ascendant now the election is delayed until – at the earliest – 2009. Increases in public expenditure on individual spending departments have far less resonance with the public than a decade ago. The days when telephone number increases had voters cheering in the Dog and Duck ended a couple of years ago, when the impact of stealth taxes began to bite on household budgets. Somehow public opinion has become inured against headline flourishes by Mr Darling and his predecessor, following stories of accident and emergency hospital closures and the constant Tory refrain that, despite massive budget increases, state education continues to turn out16-year-old illiterates.
But the big challenge for the Tories is whether they dare to challenge the basic fundamentals of Labour's tax and spend strategy. Since he became Tory leader, David Cameron has relied on a formula that long-term tax cuts will depend on the ability to share the proceeds of economic growth between higher public spending and lower taxes.
In the past – especially in 1979 – every Tory government has been returned to power because successive Labour governments have run out of money. One day this government will come to an end for the same reason. For all Mr Darling's claims to continue with "golden rules" – borrowing only to invest – he is testing the patience of "prudence" to the limits. Deficits during the years of plenty mean that during the lean years ahead, more public borrowing will result in the need for further tax increases.
The challenge for Mr Osborne is to reconsider his blanket underwriting of Labour's spending plans for the years ahead. Of course, now that there is not an election for at least two years he has the space to reconsider this strategy. It should not be lost on the Tories that the biggest contribution to their poll advance last weekend was the fact that they had, after their own appearance of dithering, daring announcements on inheritance tax.
Most voters on average incomes will face serious belt tightening during the months ahead. The end of low, fixed rate mortgage deals, increases in food and utility bills combined with smaller pay rises and fiscal drag will leave real disposable income and living standards under pressure.
For several years, the Tories have been haunted by Labour suggestions that any tax reductions could only be paid for by "cuts" in public expenditure. This, however, may be the moment when voters, faced with tightening their own belts, may also be in a mood to listen to a Tory message that government must also rein in its recent profligacy.