Osborne tries to win back trust after 'wobble' on spending cuts

Shadow Chancellor says safeguarding Britain's credit rating will be his priority

(PA)

George Osborne invited voters to judge an incoming Tory government on an eight-point "contract" on economic policy yesterday but refused to spell out how deeply the Conservatives would cut public spending this year.

The Shadow Chancellor laid out eight key "benchmarks" but came under pressure from business leaders to reveal more detailed proposals on cuts. He admitted he was taking a "political gamble" by making his first priority to safeguard Britain's AAA credit rating on the international markets because some investors believe there is an 80 per cent chance of a downgrade. His pledge could backfire spectacularly if Britain were downgraded soon after a Tory election victory.

In a keynote speech, Mr Osborne sought to steady Tory nerves after David Cameron admitted the party would not make "swingeing cuts" in the 2010-11 financial year. Although the Tories deny a U-turn, the move was seen as a tactical retreat because big cuts later this year might have put the fragile economic recovery at risk.

In a shift away from previous Tory warnings about an "age of austerity," Mr Osborne outlined a "new economic model" to secure growth. He promised a "more solid" private sector recovery driven by investment and exports, instead of the consumer borrowing and government debt seen under Labour.

"We will set out a plan in our first Budget to eliminate a large part of the structural deficit in the first Parliament. We will make a start in 2010," he said. But under repeated questioning from journalists, he declined to put a figure on this year's cuts. He said £1.5bn of savings he trailed last autumn were "examples" of cuts but refused to say whether that would be the final figure for 2010-11. Tory officials insisted the party would cut faster than Labour.

The Shadow Chancellor said people should hold a Tory government to account against the eight benchmarks. The others are: creating a more balanced economy; to "get Britain working" by reducing youth unemployment; easing tax and regulatory burdens on business; raising the private sector's share of the economy; boosting the productivity of the public sector; creating a safer banking system and a "greener economy" by cutting greenhouse gas emissions and winning a larger share of global markets for low carbon technologies.

Mr Osborne said the Tory blueprint had won the backing of several prominent businessmen including Sir Stelios Haji-Ioannou, founder of easyJet; Stephen Murphy, chief executive of Virgin Group and Andrew Witty, chief executive of GlaxoSmithKline.

Business groups welcomed the Tory plan but called for more clarity on cuts. Richard Lambert, director general of the CBI, said: "Business will now want to see more detailed plans explaining how these proposals could be delivered, and over what sort of timescales."

Tory policy: The eight-point plan

1. Macroeconomic stability Preserve Britain's AAA credit rating by eliminating a large part of the structural deficit over a parliament. Verdict: Gamble. More details needed on cuts.

2. A more balanced economy Create conditions to boost exports, business investment and saving as a share of GDP. Verdict: Harder with a slimmed-down financial sector.

3. Get Britain working Reduce youth unemployment and the number of children in workless households. Verdict: Where's the money coming from?

4. Britain open for business Improve UK's international rankings for tax competitiveness and business regulation. Verdict: Easier said than done.

5. Ensure the whole country shares in rising prosperity Raise the private sector's share of the economy in all regions, especially outside London and the South-east. Verdict: At odds with Tory pledge to end "top-down" government.

6. Reform public services Deliver better schools and a better NHS. Verdict: harder when budgets are cut.

7. Safer banking system Reform bank regulation and structure. Verdict: Good – but banks will fight their corner.

8. Greener economy Reduce UK greenhouse gas emissions and increase share of global markets for low-carbon technologies. Verdict: Same as Labour.