MPs told to cool hopes on tax cuts tax cuts

The Cabinet and senior Tory backbenchers were told by the Chancellor last night to damp down speculation about specific tax cuts, to avoid stoking expectations for the Budget.

Kenneth Clarke made it clear at a meeting of Tory backbenchers that the demands for a commitment to a fixed rolling programme of tax cuts were unrealistic. "We are on course for tax cuts - let's not have a fight over when," he said.

The Chancellor was keen to return to the formula that tax cuts could be made when "it is prudent to do so", to answer criticism that the expectations, fanned by the Prime Minister and Mr Clarke, suggested the Government was abandoning its economic principles to bribe the electorate at the next general election.

Mr Clarke impressed on MPs at a packed meeting of the Tory backbench finance committee that there would only be room for tax cuts providing the Government kept a firm grip on borrowing, and that would require tight control of public expenditure.

He was given a traditional desk-banging reception, and won the support of the MPs for tough spending controls to come. There was no point in floating proposals for tax cuts now, he said. The Government must first regain its reputation for economic competence. That meant delivering lasting economic growth.

He warned the MPs and ministerial colleagues not to get into a situation where tax-cutting proposals were floated at the same time as speculation about a £1bn spending increase in education.

That was seen as a sideswipe at Gillian Shephard, the Secretary of State for Education, who has made clear to the Prime Minister she could not tolerate another tight spending round before the election, which could lead to more unrest in the classrooms.

John Townend, the chairman of the committee, said: "It is not sensible to talk about specific tax cuts by a specific date at this stage. We are now in April, the Budget is not until November. We don't know what the picture is going to look like. It is very important that he has the support of the backbenchers in the next spending round, and there was widespread agreement for that."

Some Tory MPs at the meeting called for cuts in social security spending and for tax cuts to be directed at the family, rather than continued subsidies for single parents. But MPs had clearly got the message that Mr Clarke was not in a receptive mood about the demands for rolling tax cuts, in spite of the apparent support for them by Jeremy Hanley, the party chairman.

Mr Clarke told the 80 MPs at the meeting that he would consider the idea, but he was "sceptical" about becoming the first Chancellor to commit himself to tax cuts two years in advance.