Tories warn against tax pledges

George Osborne says promises could lead to cynicism

The Conservatives have given their strongest signal yet that they will not promise tax cuts at the next election.

Shadow chancellor George Osborne said the state of the public finances meant up-front promises of tax cuts were "very unlikely to be on offer".

In a speech in Manchester, he said such promises could lead to doubts about Conservative economic competence.

But Treasury Chief Secretary Stephen Timms said the speech showed Mr Osborne was "totally confused".

"First he proposed a flat tax. Then he promised a combination of lower taxes and lower spending," said Mr Timms.

"Now he is promising lower spending on public services but no reduction in taxes, which is the worst of all worlds, and pledging to cut tax credits, which would make up to six million families worse off.

"The Tories will never gain trust of the British people if they continue to change their economic policy from one day to the next."

Mr Osborne attacked Labour for making the tax system too complicated and promised to make it simpler.

His speech to the Institute of Directors is the closest he or Tory leader David Cameron have come to ruling out tax cuts completely.

'Don't gamble'

Critics of Mr Cameron say he is too similar to Tony Blair. They argue that tax cuts and wealth creation must be core to the Tories' appeal.

Ahead of his speech Mr Osborne insisted: "We are not going to jeopardise the stability of the economy."

He said he wanted to show people that his party was "modern and compassionate" and had "got its sums right".

"What I'm saying today is that given the state of the public finances at the moment and the very large sums of money that the country is borrowing, it is very unlikely that we would be able to make promises of upfront tax cuts at the general election," he said.

"Because, and this is a very important message, we put stability first - economic stability."

He added that in the long term he hoped to move "in the direction of lower taxes and certainly simpler taxes".

The sheer complexity of the tax system is now having a real impact on Britain's competitiveness George Osborne, shadow chancellor

In his speech, he acknowledged his words will disappoint some Conservatives but said tax-cutting promises have not led to Tory victories in recent elections.

And he will argue the "flat tax" used in former Communist countries, and favoured by some Tory right-wingers, would be too difficult to introduce.

Mr Osborne himself said in September last year that the merits of the flat tax system should be investigated.

The shadow chancellor argued for the tax system to be streamlined but he said reform would take a great deal of work.

"It requires having the courage to take on powerful vested interests who jealously guard the reliefs and tax breaks they have won for themselves."

He will also mount a fierce attack on Chancellor Gordon Brown's record of "meddling and stealth".

He will accuse Mr Brown of saddling Britain with an unfair system which is not managed competently and point to new figures showing that £1.8bn in tax credits was overpaid in 2004/5.

"There are now enough tax inspectors in Britain to fill every seat in the Olympic Stadium in Berlin where the World Cup Final is going to be held - and you'd still have 30,000 waiting outside for tickets.

"The sheer complexity of the tax system is now having a real impact on Britain's competitiveness."