Spending cuts, rather than tax rises, would be the main focus of efforts to reduce the budget deficit under a Conservative government, George Osborne said on Thursday.
The shadow chancellor also pledged to set out plans before the election for a cull of civil servants on a scale that would “pleasantly surprise” taxpayers.
Business attacked a Tory decision to protect the health budget from spending cuts, saying it ran counter to the need to involve the whole public sector in the search for efficiency savings and reduced expenditure.
“We need to look at the NHS and see what could be saved without hurting the essential services,” Miles Templeman, director-general of the Institute of Directors, told the Financial Times.
Mr Osborne signalled that he would not bow to intensifying pressure from the right of his party to revisit a commitment to increase NHS spending – important to David Cameron’s modernising drive to reassure voters he could be trusted with public services.
“I don’t for a second regret protecting the health service and saying it’s going to get a real-terms increase,” the shadow chancellor told a London event. But he said this was “not a blank cheque – it comes alongside reform”.
The Institute of Directors will seek on Friday to inject hard numbers into the debate about public finance. In a joint report with the Taxpayers’ Alliance pressure group, the institute will set out proposals to cut £50bn a year from public spending. The report’s recommendations include a one-year freeze on the basic state pension; a one-year pay freeze across the public sector, apart from troops serving in conflict zones; and abolition of child benefit.
Mr Templeman called on both parties to come clean about plans for spending cuts, to ensure that whichever party won the general election had a mandate to enact the required painful austerity measures.
“Only if it’s a very open debate will we get the kind of savings that we need,” he said.
The Tories on Thursday pledged “specific numbers” before the general election on their intention to cut the Whitehall head count. Mr Osborne declined to be drawn about how many civil service jobs might go, but forecasted: “The taxpayer will be pleasantly surprised with the scale of our ambition. I’ve not ruled out tax increases. But, big but, I’m clear that the principal way of dealing with this deficit should be spending control.
“People should not be overtaxed because a Labour government overspent . . . the focus of my attention and the focus of our work is on spending restraint.”
In a speech to Tory councillors in London, Mr Osborne said a Conservative government would “have much to learn” from how Tory-run councils already deal with constraints.
“When it comes to rooting out waste and cutting costs, or improving services [by] innovative new policies, Conservative councils are showing it can be done.”
The Labour party counter-attacked, saying: “When the Tories say more for less they mean more for the wealthiest few – but less for the many.”