Osborne says Tories will end the 'money-for-nothing' society

Shadow Chancellor says it's time for some hard truths

The Conservatives will tell voters today that they will have to swallow tough economic medicine if the party wins power as David Cameron ends Labour's "money-for-nothing" society.

George Osborne, the shadow Chancellor, will warn that there will be no return to the days of easy credit for home-buyers and businesses and that people will have to save more for their retirement rather than rely on soaring house prices to provide a nest egg. His speech to Birmingham Chamber of Commerce marks an important shift in which the Tories will give voters a sober assessment of what they could achieve if they win power against a gloomy economic backdrop. They calculate that people will prefer "honesty" and "harsh truths" to impossible promises.

As the two main parties go head-to-head on the economy, Gordon Brown will propose a global crackdown on the pay and bonuses enjoyed by bankers. Addressing the Scottish Labour conference in Dundee following his talks in Washington with President Barack Obama, he will call for international principles on pay in the financial industry to be agreed at the summit of G20 countries in London next month.

Ed Balls, the Secretary of State for Children, Schools and Families and Mr Brown's former chief economic adviser, admitted yesterday that Labour's regulation of the banks since 1997 had been too soft. "We underestimated the risks," he said. He is the latest minister to admit Labour made mistakes, as the Prime Minister comes under pressure to apologise for them.

Mr Osborne will argue that the banking crisis is a reflection of Britain's "broken economy" and dismiss Mr Brown's claim that it was "made in America".

Promising to "confront some uncomfortable truths", he will say: "It means telling people that they can't rely on massive increases in house prices to fund their retirement, and that they will have to save for a deposit to buy their own home. It means pointing out that increasing profits through ever-higher debts is not a sustainable way to build a business." He will unveil proposals to rebalance the system of corporation tax paid by business so that firms no longer have a financial incentive to go deeper into debt.

The shadow Chancellor will warn that difficult public-sector reforms will be needed. He will declare: "The unsustainable debts in our banks are a reflection of unsustainable debts in our households, our companies and our government. Our economy is broken and Gordon Brown's sticking plasters won't mend it. We need a new model of growth."

Tory MPs demanded a statement on why Lord Myners, the minister responsible for the City, has a £99,800-a-year pension linked to the Royal Bank of Scotland, as The Independent revealed yesterday. Lord Myners was a director of the RBS subsidiary NatWest and qualified for the pension after 16 years at the fund managers Gartmore, which was owned by NatWest. He has led the Government's talks with RBS, which has received more than £30bn of taxpayers' money, but denies approving the £703,000-a-year pension handed to its former chief executive Sir Fred Goodwin.

Alan Duncan, the shadow Commons Leader, told MPs: "Might Lord Myners' willingness to rubber-stamp Sir Fred's payoff have something to do with the fact that Lord Myners himself has got a £100,000 pension entitlement from the RBS Group?"