Chancellor George Osborne today rejected calls for temporary tax cuts to boost the economy, warning that they would put Britain's credit rating and low interest rates at risk.
He unveiled a package of help for small business, investment in science and infrastructure and an £800 million council tax freeze, which he said could be funded with savings on Whitehall waste and inefficiency without affecting the drive to reduce the deficit.
The Chancellor told the Conservative Party conference that the Government was taking an "activist" approach to helping families and businesses "ride out the storm" of global economic crisis.
But Labour dismissed his speech as "a hotch-potch of small measures and re-announcements" which did not match up to the scale of the difficulties facing the country.
One of Mr Osborne's most prominent Tory critics, Commons Treasury Committee chairman Andrew Tyrie, who last week warned that the Government lacked a "coherent and credible" strategy for growth, said he was "greatly encouraged" by today's announcements.
But the Chichester MP was forced to deny being "nobbled" by Downing Street, after the BBC reported that he was given a "talking to" by aides of David Cameron before facing the TV cameras.
Shortly after the Chancellor spoke in Manchester, he was given a big boost by ratings agency Standard and Poor's, which reaffirmed the UK's coveted triple-A status.
Mr Osborne said it was an "illusion" to think that injecting £5 billion or £10 billion into the economy through temporary tax cuts or extra spending - as Labour advocates - would transform the economy.
"We'd be risking our nation's credit rating for a few billion pounds more, when that amount is dwarfed by the scale and power of the daily flows of money on the international bond markets, swirling around ready to pick off the next country that lacks the will to deal with its debts," he said.
"Conference, we will not take that risk. We are in a debt crisis. It's not like a normal recovery. You can't borrow your way out of debt."
Mr Osborne confirmed plans to offer £800 million to enable all councils in England to freeze council tax for the second year in succession, saving an average family £72. And he said cash would be made available for devolved governments to run similar schemes in Scotland and Wales.
He announced plans for the direct injection of state cash into the small business sector by buying bonds under a process known as "credit easing", which aides said would deliver billions of pounds of capital and help firms which have struggled to obtain credit on reasonable terms from the banks.
Mr Osborne acted to relieve small business fears of vexatious employment tribunal claims, by launching a consultation on new fees to be paid by all applicants.
The new charges, due for introduction in 2013, are likely to be set at around £150-£250 per case - rising to more than £1,000 if there is a full hearing - and will only be returned if applicants win their cases.
Coupled with an increase from one to two years in the minimum qualification period for unfair dismissal claims, Mr Osborne said the change would give companies more confidence to take on new employees.
The Chancellor also announced almost £200 million for science, including a £50 million research centre to commercialise the Nobel Prize-winning discovery by Manchester University scientists of the ultra-thin conducting material graphene, as well as £145 million for super-computing infrastructure.
And he said the Government will spend £150 million on mobile phone masts to extend coverage to 99% of the country.
Mr Osborne, who tomorrow flies to Luxembourg to join eurozone finance ministers in emergency talks on the sovereign debt crisis, warned that Britain could not be "immune" to instability in the single currency area. Resolving the crisis would be "the single biggest boost to confidence that could happen to the British economy".
But he insisted he was "optimistic for the future" and believed that the sacrifices being made would not be in vain.
"I don't pretend to you that these are not difficult days and there are not difficult days ahead," he said. "But together we will ride out the storm and together we will move into the calmer, brighter seas beyond."
Labour's Treasury spokeswoman Angela Eagle said Mr Osborne should have adopted shadow chancellor Ed Balls' package of VAT cuts, national insurance breaks and infrastructure spending to boost the economy.
"Far from riding out the storm, George Osborne ripped out the foundations of the house as the storm was brewing by choking off the British recovery last autumn," she said.
But Mr Osborne heaped scorn on Labour's economic strategy. Ed Miliband's decision to appoint Gordon Brown's former economic adviser as shadow chancellor was like putting disgraced RBS boss Sir Fred Goodwin in charge of the banking system, he said.
John Longworth, director general of the British Chambers of Commerce, said businesses would be "encouraged by Chancellor's focus on driving the recovery through a prosperous and enterprising private sector".
But TUC general secretary Brendan Barber said: "At a time when the UK economy is stagnating, all we heard were cheap lines for right-wing activists, a rehash of old policy announcements and help for bad bosses to mistreat and sack staff on the cheap. The Chancellor is not listening to the growing calls for a plan B - and we are all paying the price."