Redwood draws up populist 'Budget' to woo soft right

Challenger in exile: Former leadership candidate reinvents his health and welfare opinions in run-up to Tory party conference

NICHOLAS TIMMINS

Public Policy Editor

John Redwood, these days, is virtually a single-handed alternative government in waiting. From his grand base in Westminster's exclusive Lord North Street, he is drawing up his own alternative Budget to be launched at the Tory party conference in 10 days' time. At the same time, he is working on longer term plans to constrain public spending and the welfare state.

Yet the initial results from the man who can now claim to be the right's standard bearer are something of a surprise - more cautious, more populist and decidedly less purist than the views Michael Portillo was purveying before John Major transferred him to Defence and largely silenced him on social issues. Mr Redwood is developing a programme to appeal to the masses - not just the Tory right.

Take the Budget. Mr Redwood would cut taxes - but not tax rates. "There's not enough money to do that yet - much as I regret it." Instead, he would restore mortgage tax relief and abolish VAT on fuel and raise the thresholds at which people start to pay tax.

And his primary target there would be the married couple's allowance, a tax break the Government has been eroding. Raising it, he says, would have two effects. "It would take a lot of low-income families out of tax altogether, creating a better incentive to work". And it would be "a sign that we believe in the family - and we have to re-assert that we believe in the traditional family".

Remarkably, given his well publicised views, he would not cut single- parent benefits - a target the Treasury is claimed to have firmly in its sights for new claimants. "I don't want to take money away from single mothers at the moment, and I've always recognised, although my critics won't allow me to, that there are many different reasons for single motherhood. You can't treat it in a blanket way.

"I don't want to take things away from people that are there at the moment. I want to use the public spending savings I have found to reward families who are doing the right thing and are under pressure. That's my way of creating the famous clear blue water."

This defence of the family leaves Mr Redwood with an unexpected position on child benefit - a traditional target for the Tory right and now, apparently, for Tony Blair. Should it remain after the election?

"I am thinking about that. But you have to remember its origins. It was partly a benefit for people who needed extra money, but it was partly also a tax break for children.

"So if you say, as Tony Blair now does, that you should take it away from the more successful, you are actually forgetting that you used to get some tax recognition for children.

And I am very reluctant to recommend anything that does more damage to decent families who try to bring their own children up. If you pin me down, I will say 'yes, keep it'. It is too dangerous to meddle with it." Even after the next election? "I don't know. But if you ask me today, yes, that is my instinct."

So where will the long-term welfare state savings come from? Mr Redwood's answer is housing and social security - but very firmly not health and education. And even where he wants to cut the bill, it is through incentives for people to provide for themselves rather than by removing benefits.

In housing, he wants much more private and less public cash injected. But on pensions, the aim must be to get the 25 per cent who have no second pension of their own into one, he says. That may require some fairly dramatic new tax breaks on which he is working. But the outcome should be a big cut in the numbers dependent on income support and housing benefit in their old age. "So that's one big area dealt with".

On unemployment, Mr Redwood favours paying more benefits to people in work rather than out of it - "beefing up" family credit and paying a similar benefit to those without children. Labour is developing similar ideas. But many on the right oppose it. They see it as producing subsidised jobs at the expense of "real" ones. "It is a hard decision to take," Mr Redwood says. "But I would want to do it in a way where it was clear that it is cheaper to pay some family credit in work than pay full income support out of work." If you add in tax cuts at the bottom, then work incentives improve all round and unemployment falls.

But what about health and education. Are they sustainable in the long term, despite all the recent warnings? "Yes. I think health and education are eminently sustainable on the public pay role and that's what the public wants."

Can this be the same John Redwood who in 1988 advocated changes to the NHS that would lead to an insurance-based service? "I've never said I want to cut the money going to the core health service. I've always been a realist. It's a very popular service which people want to see providing the best." Everyone relies on it for emergencies and complex treatment, he says, "and will continue to do so"- although more tax relief for private premiums is "something we might look at again in due course".

And on education, he declares, "I am very keen on reform, but not changing how we pay for the service."

Does this not sound all rather "One Nation", rather than a prescription from the radical right? Mr Redwood almost winces and asks "Does it?"