George Osborne put homeowners on alert for a dramatic slump in house prices today claiming that Britain’s housing market was "bust".

Gordon Brown stoked a housing bubble during his time in Number 11, the Shadow Chancellor said in his strongest critique yet of Labour’s economic management.

“We are in the bust bit after the boom,” Mr Osborne said answering questions following a speech in which he sought to demolish Mr Brown’s claims to have delivered a stable, competitive economy.

The Shadow Chancellor said Mr Brown’s reputation for economic competence had been reduced to a "heap of rubble” by the global financial crisis.

He mocked Mr Brown’s repeated claims to have tamed the economic cycle as the “high water mark of hubris” and said that he had failed to prevent unsustainable rises in house prices.

“Gordon Brown’s said ‘I will not let house prices get out of control’. But our housing market increased faster than any other developed economy, twice as fast as in the United States.”

“Now the debt bubble is bursting and banks are cutting back on their loans,” he added.

Repeating his claim that Mr Brown had failed to prepare for the economic crisis, Mr Osborne contrasted tax rises in the UK with tax giveaways in the US. By failing to save during the good years, Mr Brown had nothing to help kick-start Britain’s faltering economy now, said Mr Osborne.

However, the Shadow Chancellor refused to be drawn on the Conservatives’ own tax plans, insisting that he and David Cameron had been right to resist the “siren voices” insisting that they propose up-front tax cuts.

Dashing expectations of early tax cuts he said that it had taken Margaret Thatcher eight years to reduce the tax burden below the rate she inherited.

Mr Osborne hinted that a Conservative government would give the Bank of England new powers to regulate the supply of credit, suggesting that it could vary the assets high street banks are required to take over the economic cycle.

The Shadow Chancellor also backed banks’ calls to be allowed to swap debt for cash to help free up the mortgage market.

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