UK opposition party divided over tax cuts

BOURNEMOUTH, England, Oct 2 (Reuters) Britain's opposition Conservatives were divided today over a move by their leaders to scrap their traditional pledge to lower taxes, following three election defeats on a tax-cutting platform.

Despite attempts to show a united front at their annual party conference, prominent Conservatives argued loudly in favour of tax cuts which the centre-right party has usually supported.

''If we're not very careful we're going to be the only party that doesn't believe in lower taxation,'' former Conservative chairman Norman Tebbit told a packed debate on the fringes of the conference in the English south coast resort of Bournemouth.

''We know tax-cutting works. We've tried it and it works,'' he said.

Separately, a group of 50 members of parliament published a pamphlet setting out the case for lower taxes. It argued that the main reason the Irish economy had grown much more rapidly than Britain's in recent years was that Ireland had cut taxes.

Tebbit was a close ally of former Conservative Prime Minister Margaret Thatcher, who made tax cuts a pillar of her 1980s drive to boost the economy and encourage entrepreneurship.

But after three election defeats by Prime Minister Tony Blair's Labour Party, the Conservatives have chosen a modernising leader, David Cameron, and are casting around for new policies that can win back voters.

Cameron says he will go into the next general election, expected in 2009, promising ''no unfunded up-front tax cuts''.

Most opinion polls put the Conservatives ahead of Labour and political analysts believe they can win the next election, or at least deprive Labour of a parliamentary majority.

Blair, in power for nine years, has said he will step down within the next year and polls show Cameron is more popular than finance minister Gordon Brown, Blair's likely successor.

Analysts believe Cameron can overcome any revolt against his policies from the right as long as he is ahead in the polls.

SHARING THE PROCEEDS The party's economic spokesman George Osborne told BBC radio that, as the economy grew, a Conservative government would aim to share the proceeds beteeen spending on public services and lower taxes.

But the Conservatives would not make tax-cutting promises they could not keep, he said, adding that it was even ''conceivable'' that a Conservative government could raise taxes.

His arguments cut little ice at the fringe debate. The audience, in a show-of-hands vote, backed the motion that tax cuts should be a priority at the next election by two-thirds.

Former minister John Redwood also appeared at odds with party leaders, writing in the pamphlet on tax: ''Lower taxes are not a desirable extra you can add when everything is going fine. Lower tax rates are the way to get everything going well.'' He denied any rift with the party leadership, telling a news conference party leaders were right to say a Conservative government should share the proceeds of economic growth.

Conservative promises to reduce tax have exposed them in the past to charges from opponents that it would mean unpopular cuts in public services such as health and education.

Blair came to power in 1997 pledging heavy investment in health and education, which he argued had been starved of funds during the previous 18 years of Conservative rule.

Tax paid in Britain this year is expected to equal 38 percent of economic output.

REUTERS SK KN2338