Thatcher 'undermines' Conservative economic policy with tax cut call

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The former Tory premier's comments undermine the current leader's insistence on not giving tax breaks unless the economic conditions were right.

Baroness Thatcher told a writer from the Spectator magazine: "You can't have stability without tax cuts."

Her views will be a boost to Right-wing Tory MPs, fuelling the debate over whether the party should promise overall tax cuts at the next election.

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Baroness Thatcher with Yulia Tymoshenko, Ukraine's Opposition leader, in London this week

They come days after she infuriated the Tory leadership with a photo-call with Gordon Brown at Downing Street.

Baroness Thatcher's remarks on taxes are the latest sign of a rift between her and Mr Cameron.

She is said to be furious that he has failed to invite her to see him since he became leader.

In contrast, the former prime minister was said to be "delighted and honoured" to accept Mr Brown's offer of tea and an official portrait at No 10.

The visit overshadowed the publication of Mr Cameron's long-awaited quality-oflife report last week.

One senior Tory accused Mr Brown of taking advantage of a "frail, lonely, old lady" although his accusations were rejected by her aides.

Mr Cameron and Shadow Chancellor George Osborne have faced down party traditionalists by shifting away from the prospect of tax cuts.

For the last few months, they have insisted that economic stability, including low interest rates and low inflation, must come before tax cuts.

Mr Osborne has pledged to match Labour's spending plans for the next three years to head off Labour claims that the Tories plan to lurch to the Right.

He has insisted a Conservative government would increase spending in line with Labour - 2 per cent in real terms from £615billion to £674billion in 2010-11.

Mr Osborne has said this would make "headroom for substantially lower taxes" over this period paid for by growth in the economy.

The Spectator's political editor Fraser Nelson reported her comments on tax --which he said were made a few months ago - on his blog on the magazine's website.