Chancellor hawkish on prospect of tax cuts

KENNETH CLARKE, Chancellor of the Exchequer, yesterday delivered one of his clearest warnings yet that his ability to cut taxes before the next election would depend on the Government's success in cutting public spending.

He highlighted the 12 Treasury- led departmental deep reviews of expenditure and warned that 'bearing down on public spending is a relentless task'.

In terms that will be welcomed by Tory public spending hawks, Mr Clarke stressed that both he and his Thatcherite Treasury chief secretary, Michael Portillo, were agreed that 'controlling public spending is definitely not something that Chancellors and chief secretaries need only do once in a while.'

On Labour's attack on the tax increases from next month, Mr Clarke said: 'Tax and spending are the same issue. Labour are the high spending party and they are, therefore, the high taxing party.'

William Waldegrave, Chancellor of the Duchy of Lancaster, last night denied he had accused Lord Callaghan of lying in the House in 1967 over devaluation. On BBC1's Question Time, he said: 'I don't believe there is anything to apologise for, either on his part or mine. I am not impugning his honour.'