Taxes may have to rise to fix mess Brown has made of the economy, warns Cameron

Tax rises may be needed to balance the books after a decade of Labour mismanagement, David Cameron warned yesterday.

His bleak message will cause consternation among Tory traditionalists who have been pressing him to promise tax cuts.

The Tory leader said he 'hoped' short-term increases would not be necessary to restore the public finances if the party is returned to power at the general election, expected in 2010.

Privately, the Tories fear that Gordon Brown is pursuing a 'scorched earth' strategy that will leave them to inherit a mess in the Exchequer.

Mr Brown's ten-year run of economic success as Chancellor was built in part on tax rises introduced by the Tories before 1997 to fill a black hole in public finances.

Mr Cameron told BBC Radio 4's Today programme: 'Government always has to do what is right to safeguard the public finances.'

His warning coincided with his proposals for an 'economic recovery plan'.

He called for American-style bankruptcy rules to give struggling firms court protection from their creditors.

In a speech to the CBI, he urged the Government to cut stamp duty, scrap plans to raise road tax on older cars, and introduce a 'fair fuel stabiliser', which would cut duty as oil prices rise, and increase it they fall.

He added: 'At this point in the economic cycle, what the Government ought to be doing is cutting taxes and giving a fiscal stimulus to the economy. They can't do that because the cupboard is bare.'

Mr Cameron said a Tory Government would 'share the proceeds of growth' over the long term to make room for tax cuts.

Asked if taxes would have to rise under the Tories, he said: 'I hope that won't be the case, because I think we do have more responsible spending plans.'

TaxPayers' Alliance spokesman Mark Wallace said: 'The Conservatives may think the Treasury will struggle to afford tax cuts, but one thing is far more certain - the economy can't afford tax rises.'

They would 'harm confidence on the High Street and put more people out of work and on to benefits. Sizeable savings can be made by getting rid of unnecessary quangos, freezing Civil Service expansion and radical public sector reforms.'

Liberal Democrat spokesman Vince Cable said: 'The Tories claim they will cut taxes, yet they claim they will stick to Labour's spending plans which have already left the Government's coffers billions of pounds in the red.'