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The BBC's Robin Oakley
"A sharp change of direction"
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Michael Portillo MP
"William Hague had good reasons for making that pledge"
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Tuesday, 11 July, 2000, 14:53 GMT 15:53 UK
Hague under fire for tax backtrack
William Hague
William Hague: A recession would hit tax cuts
Conservative leader William Hague has backtracked on his flagship "tax guarantee" proposal.

Mr Hague admitted on Tuesday that a future Tory government would not cut taxes as a share of the nation's income if the economy hit hard times.

The policy was a central plank of the Conservatives' "Common Sense Revolution", launched at last October's party conference. At the time Mr Hague insisted "there will be no escape clauses, no fudging" on it.


Mr Hague has promised to restore the married couples allowance

The pledge was attacked by Labour and the Liberal Democrats as a charter for cuts in public services.

Many Conservatives - including former prime minister John Major - also warned it was a hostage to fortune and might prove undeliverable if the economy slumped.

Mr Hague's indication in an interview with the Daily Telegraph that the guarantee would not apply in a recession has been seen as a victory for shadow chancellor Michael Portillo, who publicly distanced himself from the policy when he joined the frontbench team.

We are being clear that in the event of severe recession, unexpected acts of God or war, that our commitment to health, our commitment to prudent economic management come first

William Hague

'Conscious change'

Mr Hague conceded that he had now made a "conscious change" in this policy.

"Some people interpreted (the guarantee) as meaning whatever the state of the nation's finances, whatever was happening to the health service, Conservatives would carry on regardless reducing taxes," he said.

"We have said any prudent government should be able to reduce taxes and spend more on vital public services.

"But we are also being clear that in the event of severe recession, unexpected acts of God or war, that our commitment to health, our commitment to prudent economic management come first.

"People can be assured that we will meet our commitments on health," he promised.

'Grown-up politics'

Michael Portillo told BBC Radio that Mr Hague was exercising "grown-up politics".

Far from accepting Mr Hague's remarks were a U-turn, he insisted: "We're going forward because we're being rather more specific. "
Shadow Chancellor Michael Portillo
Michael Portillo: thought to have lobbied for the pledge to be scrapped

He insisted that the policy remained in place but "in a different form," and that he and William Hague were simply "fleshing out the details" of how the tax guarantee would work.

"If we follow the policy of increasing public spending within what the country can afford, then that guarantees that we will be able to cut taxes in any normal circumstances but not abnormal circumstances, not if there was some economic catastrophe," he said.

He added that William Hague had good reasons for outlining the policy in the first place.

"It is what Conservative governments normally achieve - we normally manage to increase the amount of spending on vital public services and reduce the burden of tax".

'Hague humiliated

But the government, sensing Tory blood, swiftly reminded him that Mr Hague in the past insisted there was "a moral argument" for tax cutting.

"It appears that his moral argument collapses the minute anyone asks him difficult questions," Social Security Secretary Alistair Darling said.

Liberal Democrat Treasury spokesman Matthew Taylor said the Tories could not continue to say they could deliver tax cuts without slashing spending on public services.

He said: "This is a humiliation for William Hague who invented a tax guarantee which he knew he could never deliver."

Although the Conservatives are already committed to matching Labour's previously-announced increases in spending on health and education, Mr Hague said that the Tories would generally increase public spending by "a smaller proportion than the growth of the economy as a whole" to prevent the need for tax rises.

'Half a policy'

But Andrew Dilnot of the Institute for Fiscal Studies said if the Tories were committed both to tax cuts and to matching Labour pledges on health and education spending they would have to make cuts somewhere.

Speaking on BBC Westminster Live, he called the Tories new stance "half a policy", and said "it's reasonable to ask them now, what they're going to cut".

Mr Hague also promised in the interview with the Telegraph to restore the married couple's tax allowance, abolished by Labour this April.

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See also:

16 Dec 99 | UK Politics
Hague backs private children's homes
10 Jul 00 | UK Politics
Blair's bid to 'seize the initiative'
08 Feb 00 | UK Politics
Hague fuels Tory tax speculation
06 Feb 00 | UK Politics
Portillo signals tax rethink
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