Steve Richards: Here's one measure that could make the Tories look serious

Scrapping their pledge to abolish Inheritance Tax would throw Labour into turmoil

Party leaders must dance to the discordant rhythms of an economic crisis and a looming general election. Perhaps if an election was a long way off in the distance they would be more candid and even take different policy decisions. But the electoral clock ticks loudly. Time is running out. The looming verdict of the electorate unavoidably provides the political context in which every public utterance is made.

Most obviously this is true of a government desperate to make up some ground in the opinion polls. There are inevitable tensions between Downing Street and the Treasury about the economic impact of another fiscal stimulus, but the internal political debate is at least as important. How will the voters respond to another stimulus? Would they give it the thumbs up as the Government danced to similar tunes to President Obama or would they conclude that further spending was reckless and fear even bigger tax rises to come? There are more than economic questions to contemplate when an election moves into view.

The Conservatives also wrestle with such expedient calculations. Arguably their agonising is at least as important. They might be the ones governing in the midst of what could still be a serious recession. David Cameron and George Osborne have made much of what they call Labour's debt crisis, so frighteningly huge they argue that Britain is in the humiliating position of not being able to afford a fiscal stimulus of any kind. Mr Cameron has argued every now and again that the situation is so chronic the IMF might be forced to intervene although Ken Clarke has said that this is unlikely to happen.

Yet, if their analysis is correct, the Tories' remedy is small, a relatively tiny cut in future spending increases. Understandably they do not want to fall into the trap of previous elections when they specified a range of detailed spending cuts. This time they have not even explained how they would make the savings already proposed.

This means the essence of their pitch has been along these lines: "We live in a wrecked castle, kept going on mountains of debt. We propose to change the ashtrays." Yesterday in a speech Mr Cameron was more candid about the scale of the challenge a Conservative government would face, an important adjustment that brings a tonal consistency to their analysis of what has gone wrong and what they would need to do to put it right.

Mr Cameron made some good points, that welfare and public service reforms would not produce savings in the short term (in my view, they will need short term increases in public spending for them to be effective). With good cause he highlighted the bloated quangos that have spread like a plague in Britain with their overpaid and unaccountable anonymous figures running services complacently. Beyond an insecure need for a protective layer in decision making I have never understood how the current Government allowed so many quangos to flourish. But again an imprecise onslaught on quangos does not amount to a coherent set of economic policies.

I get the impression that the Conservative leadership is determined to avoid setting out the equivalent of an alternative Budget in the run up to the election. Again this is not surprising when they have their own supporters breathing down their necks calling for tax cuts, when there will have to be rises, and when so much time has been spent purging the image of the Conservatives as being the nasty party as it contemplates another series of spending cuts.

Nonetheless there is one policy they could propose that would change everything. It would show how serious they were about repaying debt and doing so in a way that was fair. It would be dramatic, make every front page, top every news bulletin and throw Labour into turmoil. David Cameron and George Osborne could announce that they are scrapping their pledge to abolish inheritance tax.

On many levels this would be seen as an act of perverse madness. It was the pledge delivered with panache by Mr Osborne at the Conservative conference in 2007 that almost immediately transformed the political situation in the Conservatives favour. I know it is the view of Gordon Brown's senior allies that Mr Osborne's intervention was the moment when their plans for an early election suddenly became much riskier than they already were.

I chaired a fringe meeting with Mr Osborne immediately after his speech and you could feel the mood in the room lightening as he expanded on his proposals. The membership had what it yearned, a popular tax cut. Astutely Mr Osborne was proposing to pay for it by making the non domiciles pay their dues.

But the economic situation is unrecognisable from the one in which that proposal was made. Most obviously house prices have fallen so that a tax that was already benefiting the well off disproportionately is doing so even more now. If the Conservatives want to symbolise a determination to pay back debt fairly and not in a way that takes them back to the 1980s there could be no more effective move.

Such a change would also throw the Government off course, haunted as it still is by the circumstances in which it too offered a cut in inheritance tax. Until Mr Osborne's announcement on the Monday of the Tory conference in 2007, the Chancellor, Alistair Darling, had no intention of announcing cuts in inheritance tax in his pre-budget report the following week. But because Gordon Brown was planning an imminent election Mr Darling was instructed to offer a version of the inheritance tax cut.

The Chancellor was uneasy, pointing out to the Prime Minister that the policy had not been properly costed. In the end Mr Darling had to come up with his own wheeze involving non domiciles to pay for it. Then on the Saturday before his pre-budget report Mr Brown announced there would be no election. Fleetingly the Chancellor was relieved. At least he would not have to go ahead with the rushed plan. Then he realised the report had been sent to the printers and it was too late to make any changes.

The following week he made an election rallying pre- budget report without an election. In particular he made the announcement on inheritance tax without an ounce of conviction. Many Labour MPs are still uneasy that their government is making a tax cut for the relatively well off when there is so little spare cash around.

Imagine if the Tories announced that they were scrapping their pledge. Labour would either have to follow suit, looking weakly pathetic again. Or it would enter an election supporting a tax cut they do not believe in against the Tories claiming to be the progressive party of prudence and with ammunition to back up the claim. If Mr Osborne were to reverse his pledge on inheritance tax there would be the same beneficial impact for the Tories as there was when he made the proposal in the first place. I know some close to the leadership are contemplating such a move. I wonder if they will dare to make it.

s.richards@independent.co.uk