Cameron pledges to 'restrain public spending'

David Cameron promised today to reduce planned Government spending from 2010 to avert future tax rises.

In a further widening of the divide between Labour and the Tories, Mr Cameron warned that "tough decisions" were needed to avoid a drawn-out recession.

He expressed hope that his plans would allow the Tories to avoid introducing higher levels of income tax and national insurance announced in the Pre-Budget Report (PBR).

The Conservative leader announced last month that he was ditching his commitment to match proposed Government spending from 2010/11.

Spending figures for 2011/12 and 2012/13 were subsequently revised down anyway by Chancellor Alistair Darling in the PBR, from 1.8 per cent to 1.2 per cent.

The Tory leader suggested today that even these forecasts were unrealistic and would necessitate borrowing that would hinder growth for years to come.

"The first step is to set realistic targets for public spending," he said in a speech to the London School of Economics.

"It's simple. Borrowing is now going beyond acceptable limits. Taxes are already too high - and Labour's plans for even more taxes will act as a drag anchor on recovery.

"They'll put people off from investing here and help to destroy jobs not create them. So the choice is clear, and it's a tough one - we need to restrain public spending."

The Tory leader blamed the need for lower spending on "the mess Labour have made".

He said the Conservatives had spent the last fortnight since the PBR studying the Government's figures and cited concerns about the Government's forecasts of future tax revenues.

"To pay for Labour's spending would mean substantial tax rises over and above those that the Chancellor actually told us about," he said.

He added: "If we are to avoid substantial tax rises in the future, tax rises that will hamper the recovery, we must slow the growth of Government spending.

"So I can announce today that in order to keep spending at a responsible level and to ensure the quickest possible end to the recession and the strongest possible recovery, we will not match Labour's new spending plans for 2010 and beyond.

"Only by taking this step can we ensure that the Government lives within its means and only by ensuring that Government lives within its means can we build the low tax, low debt economy that will be able to compete in the world and help create jobs, wealth and opportunity for our people in the future."

In the PBR, Mr Darling announced plans to introduce a 0.5 per cent increase in national insurance and a new 45 per cent top rate of income tax on earnings of more than £150,000 a year from 2011.

That was to begin to pay off ballooning public debt, to be incurred in the Government's efforts to spend Britain out of recession in the short-term.

Mr Cameron said he intended his proposed spending curbs would enable him to avoid implementing the tax rises, should the Tories win the next general election.

"We will not be sticking to their spending plan for 2010," he told BBC Radio 4's Today programme.

"Obviously that flows through into the future years, and will help us to get back to a situation where we are not borrowing so much and we won't have to go ahead, I hope, with the tax rises Labour have announced."

Chief Secretary to the Treasury Yvette Cooper accused the Tories of doing nothing to boost the economy.

"The Tories would turn their backs on families and businesses just when they need real help to get through tough times," she said.

"David Cameron has shown he would let recession last longer and run deeper, just as Margaret Thatcher did in the 1980s, costing us all more in the long run.

"Either Cameron doesn't understand the global economic problems we face or he doesn't care."

The Tory plans will place a further squeeze on the public sector in the years ahead.

But Mr Cameron said the Government needed to get the public finances on a more sustainable footing as soon as possible if it was to encourage renewed confidence in the economy.

"When you're making a decision about buying a house, employing extra staff or investing in a business, you want to know that your investment will pay off," he said.

"You want to be confident about the future. Labour's 'spend now, forget the future' response to this crisis is exactly the opposite of what we need.

"Instead of helping the economy out of this recession by giving people confidence that the Government has a plan to put the economy back on a stable, sustainable and responsible path, Labour's short-term give-aways actually undermine confidence and hope."

With Prime Minister Gordon Brown not required to call an election until May 2010, Mr Cameron urged him to go to the country now.

"Every week this Government is in power the mortgaging of the future gets greater, every week the debt gets larger, every week the burdens on our children mount up higher," he said.

"We urgently need a change of direction, not more of the same.

"Today I'm calling on the Prime Minister to put the choice in the hands of the people.

"Let him call an election so that Britain can decide what we want for our economy, more reckless borrowing and spending, or fiscal responsibility, more inefficiency and waste under Labour, or good housekeeping under the Conservatives, an economy built on debt, or a low-tax, low-debt economy that's built to last."