Cameron pledges stability before tax cuts

A future Tory government would put economic stability before tax cuts, the Conservative leader, David Cameron, and his shadow chancellor, George Osborne, both confirmed today.

In an interview with the Financial Times, Mr Cameron argues that restoring the Tories' economic reputation meant stability must be a greater priority than reductions in taxation.

"When it comes to the economy, I am absolutely clear that stability and responsibility come first, second and third as our priorities - and that they come before the commitment to cut taxes" he told the FT.

Mr Cameron's comments risked angering the media mogul Rupert Murdoch, who used an interview with the BBC to argue that Conservatism should be about low tax and less government.

Mr Murdoch praised David Cameron as "charming" and "bright" but warned that he didn't want to seeing the Tories aping New Labour.

"I'd really like to know a little bit more about what his vision is for the future of this country and his people, " Mr Murdoch told the BBC.

"You know, some facts and some real policies - rather than a lot of almost throwaway positions they take to change their image; so much so that, if you believe everything he says, there's not going to be an alternative between him and a New Labour government."

To the dismay of some rightwingers in the party, Mr Cameron has aggressively shifted the party towards the centre ground in the seven weeks since becoming leader, announcing U-turns in education and health policy.

Writing in the Daily Telegraph this morning, the Tory leader said the party still had a mountain to climb. "We've got to move on from the comfort-zone Conservatism of the last two elections that failed to move us beyond 33% of the vote.

"As we look at our last three election results, the question is not whether the changes of the past few weeks have been enough - but how much more we need."

Mr Cameron's comments came ahead of major economic speech in the City of London from George Osborne, the shadow chancellor.

Mr Osborne warned that lower taxes - the traditional rallying cry of the right - would have to wait until economic growth eventually outpaced public spending which would create a "sustainable path to lower taxes".

Guaranteed promises of lower taxes would not be an immediate priority said Mr Osborne because "if the public finances are in a mess, then sorting them out will have to take priority over promises of tax cuts".

He went on: "That is because stability, fiscal responsibility and competitiveness all come together in the new Conservative approach to the economy - stability to protect your mortgage, responsibility to look after your family budget, competitiveness to provide jobs and prosperity in the years to come."

Mr Osborne hinted he would keep Gordon Brown's "golden rules", on borrowing only to invest and balancing the Treasury books over an economic cycle.

He said the fiscal rules should be subject to independent scrutiny to see whether the chancellor was meeting his own disciplines. And Mr Osborne accused Mr Brown of squandering the economic legacy he had inherited from the Conservative administration.

He also announced the creation of an economic competitiveness policy group to be chaired by the Next chief executive, Simon Wolfson, and rightwinger John Redwood.

Mr Osborne said industry would be helped by a "supply-side revolution", improving the skills of the workforce, overhauling Britain's "creaking" transport system and tackling over-regulation.

Mr Osborne said: "We need a new approach that puts fiscal responsibility at the heart of tax and spending decisions. It is called sharing the proceeds of growth.

"As the economy grows, we will share the proceeds of that growth between spending on public services and reducing taxes.

"Over an economic cycle, output will grow faster than public spending. We aim to use the surplus growth to lower taxes.

"But let me make this crystal clear today: we will put stability before tax cuts. If the public finances are in a mess, then sorting them out will have to take priority over promises of tax cuts.

"Our approach of sharing the proceeds means, first, that stability is paramount.

"Second, that government is encouraged to look at ways of reducing long-term demands on the state. The public sector is prevented from taking an ever-increasing share of our national income.

"And third, over time, the government is able to lower taxes in a way that is sustainable and for the long term.

"This is crucial for Britain's ability to compete in the new global economy."

Mr Osborne added: "The story of the Brown chancellorship is now writing itself: a golden legacy inherited and a golden opportunity missed."

He urged the chancellor to accept proposals for an independent assessment of the fiscal rules as part of a "triple lock" securing economic stability, along with an independent Bank of England and Office for National Statistics.

Mr Osborne went on: "Without this independent assessment, the fiscal rules are meaningless.

"For, as the manipulations of the last year have shown, the golden rule has no credibility so long as the chancellor is the judge of his own performance against the rule and can alter the start and end dates of the economic cycle on a whim."