Conundrums

Ever since David Cameron put his name forward to be Conservative leader his economic policy has been dominated by one central idea: that by increasing public spending slower than the rate of economic growth, it is possible simultaneously to incraease public spending and cut taxes. It's moderately counter-intuitive, but it works. Last year, for example, economic growth of approximately 2.75% led to an increase in tax revenues of £5bn. Inheritance tax, for example, brings in an average of less than £4bn a year. So, on that basis, you could increase spending by £1bn and abolish IHT. Straightforward idea - and one that Brown didn't agree with. In his final pre-budget report as Chancellor he hailed an unexpectedly large increase in revenues, and then explicitly said he would rather spend this on increased spending on education than on tax-cuts.

Except, of course, that now things are different. The public sector finances are looking decidedly less healthy than they were, deficits are larger in the UK than anywhere in Western Europe and the Prime Minister has decided to curtail the growth in public spending to, er, below the expected level of economic growth. In other words, the Prime Minister has more or less adopted Conservative economic policies.

Unsurprisingly, given that these have been Conservative policy for nearly two years now, the Tories have confirmed that they'll stick alongside these plans. And what's the reaction? Largely that the Tories have tagged along with Labour - in an echo of Labour's own pledge to stick to Tory spending limits in 1997 - and that, as a result, the Tories have denied the public a choice at the next election. But, given that it was basically already Tory policy, surely the question should be why Labour, having routinely rubbished Conservative economic proposals, should now be applying them.

At the moment the line of attack seems to be: "The Government have tacitly accepted that you are right about the economy - shouldn't you now change your policy to be different to them?" Which is rather odd.