The plan, to be launched at the Conservative conference in Birmingham today, has been drawn up with the advice of economic experts, including Mr Brown's former top civil servant at the Treasury. Mr Osborne said the Tories would offer the country a "new commitment to bring the budget back into the black".
Mr Cameron and his wife Samantha arrived in Birmingham yesterday on the eve of the four-day gathering that will see the Tory leader present his party in a sober new light amid the fears over economic stability.
But the fixture in Birmingham was overshadowed by new revelations over the Conservatives' financial backers as the party builds up its war chest in advance of the next general election. An analysis of party funding details has revealed that the Tories have accepted more than £6m from organisations that could allow "secret" donors to support parties.
The party's take from "Unincorporated Associations" has more than trebled to in excess of £1m a year since 2001. But political opponents and democracy campaigners claim the method exploits a loophole that could allow dodgy donors to get round funding rules without being uncovered.
With all eyes on the global financial crisis, Mr Cameron and Mr Osborne must use the Tory conference to convince voters to trust them to run the public finances. A poll on Friday showed that the Prime Minister and Alistair Darling are now more trusted on the economy than the Tory pair, while Labour has eaten into the Conservative lead since the banking crash a fortnight ago.
In an exclusive interview with The Independent on Sunday, Mr Osborne attempts to bolster his economic credentials by declaring he was right not to bow to pressure from Tory traditionalists to commit to income tax cuts at the next general election.
"We resisted that pressure, and that has been entirely vindicated," Mr Osborne said. "I would now be in an extremely difficult position as shadow Chancellor, given the deteriorating public finances, if I had committed us to instant income tax cuts."
A new Office for Budget Responsibility, staffed by independent economists, would strip the Treasury of publishing Budget forecasts. It would have a duty to tell the British public whether the chancellor of the day was living up to his or her responsibility to the public finances and carry out a full audit of off-balance sheet liabilities, including PFI schemes, Network Rail, and public-sector pensions.
Mr Osborne will say that the global financial crisis shows that Labour's fiscal rules have failed and a "radical new plan" is needed.
On Friday, the Prime Minister called for an end to the "age of irresponsibility". The Tories seized on the remark as Mr Brown was Chancellor for 10 years before entering Downing Street last year.
Those advising the Tories include Lord Burns, former permanent secretary at the Treasury under Mr Brown and now chairman of Abbey, Sir Alan Budd, former chief economist at the Treasury and founder member of Monetary Policy Committee, and Professor Ken Rogoff, former chief economist of the International Monetary Fund.
Mr Osborne said: "It will transform the way budgets are made, stop chancellors fiddling the figures, and protect the public from reckless debt. The proposal for a new independent Office for Budget Responsibility is the most far-reaching change to fiscal policy in living memory.
"People can see just how much long-term thinking the Conservatives are doing and how the election of a Conservative government would herald a new age of responsibility and economic reconstruction."
In his conference speech tomorrow, Mr Osborne will unveil a new set of Conservative Party rules to prevent debt by banks spiralling out of control and restrict borrowing by the Government. The Debt Responsibility Mechanism, enforced by the Bank of England, will require banks to put money aside during boom years so they are not left vulnerable during a slump – effectively "fixing the roof while the sun is shining".
Customers of collapsed banks or building societies will be able to access their savings within seven days instead of months, and will have £50,000 of savings protected rather than the £35,000 limit now.
Chief Secretary to the Treasury Yvette Cooper said: "If George Osborne wants to cut borrowing at this time he needs to explain how he intends to do it, especially when he has already committed to over £10bn worth of unfunded tax cuts."
Boris won't be the 'warm-up guy'
Tory officials are trying to keep a lid on the rivalry between David Cameron and Boris Johnson, it emerged last night. A behind-the-scenes row erupted between the offices of the Tory leader and the London Mayor over the timing of Mr Johnson's speech, according to insiders.
Mr Johnson had been pencilled in to be the Tory leader's "warm-up guy" on Wednesday, but was shunted to a less high-profile slot today, said a source.
Officials feared the popularity of the London Mayor could compare unfavourably with the Tory leader. And with Mr Cameron adopting a more sombre tone – addressing activists from a lectern rather than walking about the stage with no notes – Mr Johnson's appearance would jar with the mood, say officials.
There was even a rumour that Mr Johnson's conference pass will be deactivated on Monday, following his speech.
Mr Johnson has a history of making waves at Tory conferences. Two years ago he was mobbed by the press after criticising Jamie Oliver's healthy eating campaign at conference.
Jane Merrick
Comments