By Frank Prenesti
LONDON, Nov 18 (Reuters) - Britain's opposition Conservatives broke ranks with the government on Tuesday on the issue of higher spending to tackle looming recession after a poll showed their lead over the ruling Labour Party evaporating.
In a fresh attempt to convince voters of their ability to manage the economy, the Conservatives said they were abandoning plans to match government spending proposals which they said would lead to higher taxes.
An Ipsos Mori poll showed the Conservatives' lead over Labour had dropped to just three points from 28 points in September. An election is due by mid-2010.
The Conservative Party has struggled to regain political momentum since Prime Minister Gordon Brown, a former finance minister, took action to counter the effects of a global credit crunch with initiatives such as bank recapitalisation.
Over the weekend, Conservative Treasury spokesman George Osborne came under fire for remarks the Labour party said could cause further weakness in the pound.
At a G20 summit of world leaders in Washington last weekend, Brown reiterated his call for countries to introduce fiscal stimulus packages to boost the stalling international economy.
The Group of 20 leading industrialised and developing countries also urged fiscal stimulus measures, be they tax cuts or government spending, as well as interest rate cuts, but left it up to individual countries over what actions to take.
Brown's Labour government is likely to announce unfunded tax cuts in its pre-budget report on Monday as part of its efforts to mute the effects of what is expected to be a deep and prolonged recession in Britain. The country's gross domestic product shrank by 0.5 percent in the third quarter.
However, Conservative leader David Cameron said it was time to restrain spending growth.
"What once looked affordable in boom times is now clearly unsustainable. Let me put this as clearly as I can -- unless we curb the growth of spending, taxes will need to rise in future," Cameron told a news conference.
LEAD SLASHED
Until the financial crisis worsened, the Conservatives had enjoyed a big lead in opinion polls and looked set for victory in the next parliamentary election.
However, the Ipsos Mori November political monitor put support for the Conservatives on 40 percent -- down five points on a similar poll by the same organisation last month -- and Labour up seven points on 37 percent.
"Obviously the economy is the reason for this dramatic change. People turn to a leader in a time of crisis," Julia Clark, head of political research at Ipsos Mori, told Reuters.
"I think Brown has very cleverly managed to avoid being blamed for the current economic situation," she said.
The Conservatives said in September 2007 they would match government spending for the three years to 2010/11 as a forecast rise in spending of 2 percent was within their own predictions for the period. Since then, the economy has nosedived.
Cameron said tax cuts could only be implemented if they are fully funded and not paid for out of borrowing.
"Britain enters this recession with one of the largest budget deficits in the modern world. The gap between the tax that comes in and the spending that goes out is likely to be 60 billion pounds this year," he said.
(Writing by Jodie Ginsberg; additional reporting by Adrian Croft)