The next Conservative government will be a tax-cutting government

William Hague

Conservative leader William Hague said his party would deliver the tax cuts by 2004 and still match Labour's planned investment in schools and the NHS.

In a clear pre-election strike, Mr Hague said the proposals gave voters a clear choice between "a Labour Party that has reverted to old tax and spend policies" and a tax-cutting Tory Party.

Labour attacked the plans, which are equivalent to 4p off the basic rate of income tax, saying the proposed tax cuts were based on made up figures.

Chancellor Gordon Brown said the policy would lead to "deep cuts" in public services and argued that Labour would target tax cuts at those in most need.

Identified savings

The Tory tax proposals were announced jointly by Mr Hague and shadow chancellor Michael Portillo in speeches to right-wing think tank the Institute of Economic Affairs on Tuesday.

Tory sums

Save �1.8bn by reducing civil service costs Save �1bn by cutting benefit fraud Save �900m by getting lone parents into work Save �450m by reforming industrial injuries benefit Save �400m by replacing the New Deal Save �400m by cutting red tape and selling assets Save �300m through DTI reforms

Mr Portillo and Mr Hague said �5bn of potential savings had already been identified. Details of where the remaining �3bn will come from will be announced in the coming weeks.

Mr Portillo said: "Because we have specifically identified where the money is coming from, we can reassure the public that we will be able to commit to the large rises in spending on our schools and our NHS planned by the government."

'Black hole'

But Andrew Dilnott of the independent Institute for Fiscal Studies said some of the �5bn had not yet been accounted for.

"At least �1.5bn is from cutting bureaucracy and fraud which all governments seek to do but cannot guarantee to deliver," he said.

And Liberal Democrat Treasury spokesman Matthew Taylor also criticised the plans.

"Michael Portillo has had to admit a �3bn black hole in his tax plans within moments of launching them.

"Their plans assume savings beyond anything Margaret Thatcher was ever able to deliver, and no-one has forgotten how schools, hospitals and pensioners all suffered.

In his speech Mr Hague said lower taxes would boost the economy, create jobs and allow people to keep more of their own money.

"Conservatives believe high taxes damage prosperity, drive away tomorrow's entrepreneurs, undermine a good conscience, generosity, and a sense of personal responsibility and lead to a deep cynicism about the institutions that give our lives moral shape.

"Low taxes are not just the basis of a dynamic economy, but also the foundation of a compassionate, responsible and free society."

He added: "My message to hard-working families who are being squeezed by Labour's stealth taxes is this - you can now be sure that the next Conservative government will be a tax-cutting government."

'Boom-bust ways'

The Conservative leader's pledge came a day ahead of the Queen's speech win which the government will set out its legislative agenda for the next parliamentary session - expected to be the last before a spring election.

Labour accused the opposition of making up its figures and promising savings that did not exist.

Mr Brown, speaking to the National Council for One Parent Families, condemned the tax proposals saying: "The people of Britain will never forgive those who lurch from one opportunist tax decision to another, retreating to the old, short-termist, boom-bust ways of the past.

"This government will do nothing that puts this country's stability and our public services at risk."