Cameron: We won’t match Labour spending

David Cameron has made a crucial break from former policy, saying the Tories would no longer look to match Labour spending.

In a broad speech laying out the Conservatives’ economic philosophy, Mr Cameron said Gordon Brown’s recent approach required so much future debt the Tories would have to find a new approach.

“Growth rate for 2010 will have to be lower than that pencilled in by Labour,” he said.

The statement marks an important break on Conservative economic policy, which until this morning was pegged to Labour spending.

While professing himself to be dedicated to helping people who had lost their jobs or were in danger of losing their homes, Mr Cameron launched a robust defence of a low tax, low debt policy.

“Some people think this commitment is redundant in a recession,” he said. “I repeat our commitment is not for one year, not even for one term, but for an economic cycle,” he said.

As part of his stall setting out what a Conservative financial agenda would look like, Mr Cameron made the case against regulation as a hindrance to growth.

In terms of fiscal policy, he argued the recessionary effects of falling revenue and increased benefits spending should be allowed to happen – but without excessive borrowing.

His argument against borrowing came down to an evaluation of its risks, against evidence suggesting such a tactic works.

In terms of risks, Mr Cameron said taxes would have to rise while public spending decreased in order to service growing interest on debt.

Further borrowing would also damage confidence, causing investors to lose faith in the national economy and leading to further depreciation of sterling.

The current estimate for growth in 2010/11 is jus over two per cent. The Conservatives did not reveal their own estimate today, but announced their disagreement with the figure, which they consider optimistic, and their intention to therefore disassociate themselves from Labour spending.

“They’ve made their choice, we’ve made ours,” Mr Cameron said.

“Gordon Brown knows borrowing today means higher taxes tomorrow and if he doesn’t tell you that today he’s misleading you.”

The Conservative’s have been losing ground to Labour on the central issue of the economy since the banking crisis hit in the summer.

Liberal Democrat leader Nick Clegg called the announcement “economic madness”.

He said: “After months of wandering aimlessly on economic policy David Cameron has finally performed a full U-turn.

“The Conservatives clearly can’t be trusted to create a fair society.

“Today’s announcement is economic madness. No-one can predict the length and depth of this recession so making promises for two years time is foolish.”

Responding to the Tory plans, prime minister Gordon Brown said: “The only group that are setting their face against what is necessary to help families and businesses now is the Conservative party.

“Real help now for jobs and businesses means growth returns more quickly.”

Yvette Cooper, Labour’s chief secretary to the Treasury, said: “Unlike the Conservatives, we refuse to abandon people in tough times.

“Instead of a shot in the arm the Tories would give the British economy a slap in the face.”