Cameron ends pledge to match Labour's spending plans

David Cameron has made the hugely significant announcement that the Conservatives will no longer adhere to Labour's spending plans from the financial year 2010-2011. This is a massive step and shows the Conservatives are no longer afraid to take the fight to Brown on his favourite "Tory cuts vs Labour investment" attack line which needs to be shown as the lie it is. The Tories argue that with the changed economic circumstances, Labour cannot keep borrowing and spending without cost. By freeing themselves from their self-imposed public spending strait-jacket it also means that Cameron and Osborne have given themselves the room for manoeuvre to offer tax cuts funded by public spending reductions (though not cuts - see below).

Linking to his 'fiscal responsibility' economic policy position, Cameron said the Conservatives would seek to build a low tax, low debt, low interest rate economy. He said Labour's spending plans were based on widely optimistic growth assumptions and therefore the country was faced with two choices:

1) The Conservative Choice - Revise government spending plans by reducing the growth of public spending below that of the growth in the economy (but not cutting public spending - an important difference that Labour will no doubt ignore). The Tories would reduce the growth of public spending so that the country lived within its means and didn't burden the country with future increased taxes to pay for reckless public spending which would impede Britain just when the economy was trying to recover from a recession.

OR

2) The Labour Choice - Raising taxes. Cameron said that with Darling and Brown likely to announce unfunded tax cuts and increased public spending to the tune of £30 billion paid for by higher borrowing and with many government ministers including the Chancellor, Tony McNulty and Lord Mandelson hinting that tax rises will have to come in after the next general election to pay for the borrowing induced increases in the structural deficit, Labour has made its choice.

It was interesting to hear Osborne's take of the announcement. When asked how would the Conservatives deal with Labour attacks that the Tories would cut spending on public services, Osborne effectively said he relished the debate which he framed as Conservative restraint vs. Labour tax bombshell. He said he was very interested to see how Labour would respond. If the government attacked the Conservatives, Osborne said it would be clear to all that Labour would be planning on increasing taxes after the next general election because it was unwilling to bring public spending under control. If they went quiet then it would be clear that the Conservatives were making the running on the economy and that Labour agreed its own spending and borrowing had got out of control.

The Conservatives have adopted a very clever position. But, I wouldn't expect Labour to take this quietly, George...

UPDATE: Robert Winnett makes an interesting point over at the Telegraph's Three Line Whip. He says the Tories are betting everything on a 2010 election. He writes: "They are cleverly preparing for a post-recession world in which the big political debate will be how the Government extricates itself from the meltdown in public finances. Tax rises or spending cuts?... However, with big quick tax and interest rate cuts on the way, 2009 will be looking increasingly attractive for Brown. He won't be able to pull the same trick next year and the eye of the recession may be the best time for Labour to go to the polls. By 2010 they may be long forgotten and any recovery will be in the very early stages... The Conservatives will be hoping that Brown doesn't have the nerve to go early."