Letwin shows his hand on Tory tax policy

The Shadow Chancellor has shown his cards to Gordon Brown - and pledged to find the enormous cost-savings necessary to enable a Tory government to maintain investment in health and education, without raising taxes.

Oliver Letwin has claimed that a Conservative administration would be able to cut around £35 billion from the public finances budget - and so could sustain investment in essential services.

In a speech to the Bow Group in London, Mr Letwin said that he could avoid tax rises by ensuring that overall state spending grows less quickly than the economy as a whole. The Shadow Chancellor said that he could cut back on bureaucracy and funds earmarked for other state services to make his proposed cost-savings.

In about seven years time, this would mean that the proportion of GDP consumed by the public sector would fall from 42 to 40% - saving around £35 billion a year on Labour's current plans, he said.

Mr Letwin said he would put the squeeze on tackling waste, and exercising firmer control over welfare, transport, defence, and environmental budgets.

Once the efficiencies had been made the Tories could go about reducing official debt, and so create a sustainable basis for reducing taxes, he said.

"A Conservative government, if elected at the next election, will take no risks with the public finances. A Conservative government, if elected at the next election, will maintain high levels of growth in spending on hospitals and schools. But if elected at the next election, a Conservative government will not rely on tax rises to fund structural increases in public spending as a proportion of GDP," he said.

Mr Letwin added: "No-one should be in any doubt about the radicalism of our ambitions in healthcare and schooling. We want to achieve nothing less than a transformation of the results by bringing about nothing less than a transformation of the methods."

(gmcg)