Brown's spending plans will force up taxes, says Osborne

Gordon Brown's plans to "spend his way out of recession" risk deepening the downturn and saddling future generations of Britons with massive tax hikes, shadow chancellor George Osborne warned today.

In a speech drawing dividing lines between Conservative and Labour approaches to the economic crisis, Mr Osborne branded the Prime Minister "irresponsible" for suggesting the Government can "borrow without limit" to stave off recession.

And he said that the policy of borrowing more to pay for a state "spending splurge" was "a cruise missile aimed at the heart of the economy", which would force taxes up in the long term by the equivalent of 4p on income tax.

In his first speech since he acknowledged making mistakes over his contacts with Russian tycoon Oleg Deripaska, Mr Osborne sought to put the "Yachtgate" row behind him and return to the offensive on the economy.

He accused Mr Brown of abandoning fiscal responsibility in favour of the "failed and discredited" Keynesian demand management techniques which led to soaring inflation in the 1970s.

In his half-hour address at the London School of Economics, Mr Osborne said that voters now have a clear choice between future Labour tax hikes to repay huge national debt, or a Tory "responsible road to recovery" which will eventually bring down levies.

Mr Brown and Chancellor Alistair Darling have insisted that they will allow government debt to rise and spend in a bid to keep the economy on track.

But Mr Osborne said this approach was the "weak, irresponsible choice" and would make it more difficult for the Bank of England to achieve a "sustained reduction in interest rates".

"It saddles this generation and the next with a burden of debt that could take a decade or more to pay off," warned the shadow chancellor.

"It means you end up spending more on paying debt interest than defending your country or educating your children. It means damaging tax rises at the very moment when you want to be reducing taxes to help the recovery."

And he added: "Gordon Brown's talk of a spending splurge tries to give the impression of activity and action, when in fact it is the road to economic ruin. It may even involve another 10p-style tax con, but under Gordon Brown everyone knows we will have higher taxes for many many years to come."

Increasing borrowing to boost state spending by just 1 per cent of GDP would mean future tax hikes equivalent to 4p on income tax, said Mr Osborne.

"That is not just a tax bombshell, it is a cruise missile aimed at the heart of the economy and in extremis that can mean we lose the confidence of international markets," he warned.

"The Prime Minister's desire to spend his way out of recession will not only make the recession worse, it will undermine the recovery too."

Mr Osborne promised to "stick to fiscal responsibility", while interest rate cuts and measures such as freezing council tax "get money in people's pockets".

"By ensuring that we don't borrow without limits in a recession, we will open the way to lower taxes in the recovery," he said.

"So there's the choice in British politics.

"Irresponsible borrowing now and higher taxes later under Labour.

"Or the responsible Conservative plan. Let the Bank of England cut interest rates now and lay the ground for lower taxes later."

Labour's Treasury minister Angela Eagle accused Mr Osborne of "confusion" about Tory economic policy.

Ms Eagle said: "George Osborne has again shown today that the Tories do not have a coherent answer to the global financial turmoil.

"The Tories remain totally confused on borrowing: first calling for borrowing to fall, then they said it was right to rise, now George Osborne says he wants a limit but cannot say what that limit would be.

"Only two weeks ago, Osborne pledged not to interfere in the Bank of England's independence in setting interest rates, now he's calling for a cut.

"And today, while Labour is reducing taxes by £120 for 22 million basic rate tax-payers and freezing fuel duty, George Osborne is the one who is proposing an immediate 5p per litre increase in fuel duty - a damaging tax rise at a difficult time for families and small businesses."

Labour left-winger John McDonnell said the shadow chancellor's proposals were "a recipe for large-scale unemployment".

"Osborne's speech was just rehashed monetarism," said Mr McDonnell, the chair of the Left Economics Advisory Panel. "It was a recipe for large-scale unemployment with ordinary people shouldering the burden of this recession.

"Brown may not have fixed the roof while the sun was shining, but Osborne is knocking down the walls too."