Tory right urges pounds 10bn cuts to fund tax reliefs

DONALD MACINTYRE

Political Editor

A starkly ambitious agenda for tax reductions funded by up to pounds 10bn in deep spending cuts was urged last night on Kenneth Clarke, the Chancellor, in a submission by the right-wing 92 Group of Tory MPs.

The most influential Thatcherite caucus on the Tory back benches went further even than John Redwood in the recent party leadership contest by exhorting Mr Clarke to consider itemised cuts of "at least" pounds 5bn and saying that they should be "ideally nearer" to pounds 10bn.

Sweeping cuts in overseas aid, arts funding, public housing, improvements in prison conditions and per capita spending in Scotland and Wales were at the head of an unexpectedly specific menu of spending cuts pressed by the MPs. Mr Redwood said cuts of pounds 5bn could be achieved. But the 92 Group submission, drawn up under the chairmanship of John Townend, chairman of the backbench finance committee and a Redwood supporter in the leadership elections, said the higher figure would only mean a 3 per cent cut and was "entirely possible".

But instead of proposing straight cuts of 2p in the pound in the basic rate of income tax - which the MPs say would have a "stimulating effect politically and economically", the submission suggests reliefs aimed at winning back core Tory supporters - "those who save, and families who provide a secure environment for raising their children" - including:

t An increase by pounds 1,000 in tax allowances to the over-80s "to help those who have made provision for their retirement";

t Phasing out capital gains tax and inheritance tax over three years;

t Restoration of the married person's tax allowance - currently 15 per cent.

Homeowners should be given tax relief on the mortgage insurance payments required by the Government's decision to withdraw income support from unemployed homeowners. It also advocates a "slight" increase in mortgage interest tax relief and that stamp duty on house sales should be phased out over three years. In the one concession to industry, it says there is a case for using excise duty to "create a level playing field" for British brewers.

A programme of cuts which several quarters of the party will see as savage also proposes a total freeze on public sector recruitment with the exception of police, teachers and medical staff. It also says that all surplus land and housing held by the Ministry of Defence would be disposed of within one year.

It calls for capping to be lifted but also for standard spending assessments fixed by central government for local authorities to "assume cuts in manpower". It also insists councils with outstanding uncollected community charge, council tax or rents, should have government grants withheld until at least 25 per cent of the debt was recovered.

Finally, the group called for a fresh assault on the social security budget, ending "the single parent premium" and ensuring that no income or housing support should be paid to asylum seekers after their application is determined one month after arrival.

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