Osborne outlines Tory plans to revive the UK economy

By SAM FLEMING FOR MAILONLINE
Updated: 18:55 EST, 24 February 2010

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The Tories will announce a cut to the rate of Corporation Tax less than two months after taking office as they attempt to bolster companies’ shaken faith in the UK.

George Osborne said last night that he would publish his first budget 50 days after the election, declaring it would introduce immediate steps to ‘boost enterprise’.

The budget would also introduce draconian deficit-cutting steps to shore up market confidence, Osborne disclosed in the City of London’s Mais Lecture.

The restoration strategy: George Osborne has laid out Tory plans to revive the economy, which includes clamping down on public sector pay

He revealed that the Tories will follow a three- step plan to restore stability to the public finances if they win at the polls, staring with the creation of a new Office for Budget Responsibility within days of taking power.

This would be tasked with publishing a ‘truly independent audit’ of the Treasury’s finances.

The subsequent Budget would contain a clampdown on public sector pay and pensions in a bid to ‘help put our public finances on a sustainable footing’, Osborne said.

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Over the summer, the Tories would go on to work ‘flat out’ to conduct a detailed review of departmental spending from 2011 onwards, as they push ahead with plans to hack away at the public sector.

Osborne’s speech stressed his determination to attack the UK’s £178billion deficit immediately after winning office, in contrast to Labour’s plans for a continued fiscal stimulus.

Failing to tackle Britain’s near-850billion public debt mountain would undermine Britain’s recovery and endanger market confidence in the national finances, Osborne said.

It could also lead to a jump in borrowing costs, as the market demands higher rates when it lends to the Treasury.

Osborne said: ‘For an economy like the UK with such high levels of private debt, increases in market interest rates would be particularly devastating to the prospects of a private sector recovery.’

He added: ‘In the most extreme cases, countries that lose the confidence of markets effectively lose their sovereignty.’

But Osborne also attempted to play up his party’s corporate credentials, saying his first Budget would ‘boost enterprise, encourage new jobs and show that Britain is open for business.’

This was intended as a reference to his plans to cut Corporation Tax from 28pc to 25pc, funded by the abolition of allowances and reliefs, party sources said. The government’s debt-cutting efforts would be monitored by the new OBR, which would publish independent deficit forecasts and issue recommendations to the Treasury.