Tories promise to help pensioners

The Conservatives outlined plans to axe increases in national insurance and reduce the tax burden on pensioners and savers yesterday as part of a new year assault on Labour.

George Osborne, the shadow Chancellor, said he wanted to reverse Labour's planned increase in national insurance for employers and employees.

He said he was also considering measures to cut the tax burden on savers and pensioners who have been hit by dramatic cuts in interest rates

His move is designed to put ground between Labour and the Conservatives, heralding a general election battle over future tax rises and the cost of borrowing to fund the Government's fiscal stimulus package. Conservatives have condemned increasing government borrowing to pay for a 2.5 per cent cut in tax and have poured scorn on the prospect of tax increases after the next election to fund short-term injections of cash into the economy.

Yesterday, David Cameron and Mr Osborne foreshadowed their winter offensive against the Prime Minister, stepping up their attacks on Gordon Brown's stewardship of the economy.

Mr Cameron accused Mr Brown of "economic crimes", insisting that the Prime Minister had driven Britain to "the brink of bankruptcy". Mr Osborne said the Government's spending policies were turning the country into "a bankrupt country on the verge of becoming the sick man of Europe again with high unemployment".

Yesterday, Mr Osborne told The Sunday Times: "I am not writing my 2010 Budget now but my priority is to try to reverse the increase in national insurance because it is a tax that affects the vast majority of people in Britain. It is a tax on incomes at a time when people will be under severe strain."

National insurance will rise by 0.5 per cent for employers and employees from 2011 – well after the latest possible date for a general election – under plans announced by the Chancellor, Alistair Darling. Mr Osborne, who has dropped his party's pledge to maintain Labour's spending plans, promised that any tax cuts would be funded through reductions in public spending or increases in other taxes.

Aides said the party would outline in the coming months how any planned tax cut would be funded but pointed to the fact that Mr Osborne had targeted cuts in national insurance, which is paid by people earning more than £20,000, rather than focussing on Labour's proposed new 45 per cent top rate of tax on the highest earners. Mr Osborne also signalled help for savers and pensioners, arguing they are "the innocent victims of Gordon Brown's incompetence. These are the people who did the right thing in the age of irresponsibility. They get penalised by the understandable reductions in the Bank of England base rate."

Angela Eagle, the Financial Secretary to the Treasury, said yesterday: "George Osborne is happy to try to grab headlines with vague talk about tax cuts but as usual he can't say anything about how he would pay for them."