Osborne plans to cut corporation tax

Corporation tax would be cut for companies as part of a Tory drive to tackle Britain's debt crisis, the shadow Chancellor, George Osborne, has signalled.

The Conservatives have already announced plans to reduce the tax from 28p to 25p, but Mr Osborne said he wanted to reduce the headline rate further.

The reduction would be achieved by firms getting less tax relief on the cash they borrow, with companies encouraged instead to raise extra money by issuing shares. Mr Osborne argued the move would make British firms more competitive internationally.

"I have already committed to reduce the headline rate by 28p to 25p by reducing complex reliefs and allowances," he told business leaders in Birmingham. "But we will need to go further if we are to keep pace with an increasingly competitive global economy."

The shadow Chancellor repeated a warning that a Tory government would have to carry out "major reforms" to the public sector in order to bring the public finances under control. He said the next administration would inherit "the worst public finances since the Second World War".

"Our economy is broken and Gordon Brown's sticking plasters won't mend it," he said. "We have got to bring the public finances under control. If the Government has lost the appetite to confront this truth, then the Opposition has not. We will bring about major reforms to the culture of Whitehall, putting the emphasis on value for money."

He said the public and businesses needed to accept the "uncomfortable" truth that they would have to work harder and save more if Britain was to pull out of its current difficulties.