The Tories in Bournemouth: Clarke fails to quench thirst for tax cuts: Chancellor claims recovery marks an end to 'boom and bust' cycle, but admits there is still a lot further to go

KENNETH CLARKE, the Chancellor, yesterday restated his determination to end the economic cycle of boom and bust, and told the Bournemouth conference he would never cut taxes for short- term political gain.

In a sober speech, Mr Clarke acknowledged the Tory faithful's thirst for tax cuts, but gave no hint as to when he might quench it. 'We will work in the economic fields today to nurture a healthy economy and reap a tax cutting harvest tomorrow,' he said.

Mr Clarke was given a two- minute standing ovation, dutiful rather than rapturous. A succession of speakers declared their wish to see tax cuts - a message underlined in 42 of the motions on the agenda, but no one specifically demanded action in next month's Budget.

Michael Fallon, a Thatcherite who failed to hold Darlington at the last general election, came closest. He said the Conservatives had cut taxes before while improving public services, and had been re-elected: 'Let's do it again . . . Yours is the timing but ours is the principle. Conservatives believe in reducing the weight of taxation . . . Hammer away at inflation, cap public spending and cut taxation.'

Mr Fallon suggested the 20p band could be reduced further and cuts made in taxes on pensioners and capital gains.

After two days of open division between serving and former Cabinet ministers over the European Union, Mr Clarke began with a warning, saying the party should remember who had put it into government and why.

'The British people put us there. We must ask what they want - the public servants, the pensioners, the young married couples, the middle managers, the entrepreneurs. They don't won't to listen to some of us having a so- called ideological battle with each other. They want us to agree to do things that will improve their quality of life.'

Mr Clarke said the public did not believe in quick fixes. Mocking his Labour shadow, Gordon Brown, he said the British people might ask what was different about the recovery and wonder about trying a 'post neo-classical endogenous growth theory'. What was different was that the balance of payments was improving as the recovery grew stronger, led by exports. Economic growth at 3.8 per cent was much higher than the underlying rate of inflation at 2 per cent. Amazingly the rate of growth had only exceeded inflation in Britain for three out of the last 30 years.

'We are delivering a recovery that shows we are committed to ending the days of boom and bust,' he said. Sound economics was also good politics: 'Political recovery will come when the economy produces real improvements, to real men and women in their everyday lives.' Things were getting better, though he knew they must improve a lot further. 'To those people who were hurt in the recession, I say: 'Stick with us. The best is yet to come'.' The Government had got the economic fundamental right - 'sustained growth built on low inflation'.

He said Labour wanted 'a fantasy world in which public spending is increased but in which 'Middle England' won't be taxed a single penny more to pay for it. As for the Liberals, what can you possibly say about a political party that wants people to be able to buy pot, but wants to tax them so much they won't be able to pay for it?'

Bringing the faithful on side, Mr Clarke said they knew he could give the conference no undertakings as to when tax cuts would come. 'I will cut taxes as soon as I prudently can. It's just a matter of when, not whether. . . But one thing I do know. We will deliver tax cuts which are based on solid economic achievement.'

Opening the debate, Stephen Reid, who unsuccessfully defended Eastleigh in June, said he felt 'uneasy and disappointed' at this year's tax increases. But he accepted Mr Clarke's approach, that tax cuts had to follow the establishment of low inflation and sustained growth. 'We have been through hell and back for it, and it has taken too much courage and too much pain for us to give it up now.'

(Photograph omitted)