George Osborne provoked a confrontation with the unions last night by suggesting that a Tory administration could introduce new measures to curb their power.

The Conservatives were considering reforms to employment legislation as a matter of “urgency” because of the threat of widespread unrest in the public sector over pay, the Shadow Chancellor said yesterday.

“I think the public service unions have grown too powerful. We would also look at any changes that need to be made in employment legislation. We are still in the process of looking at what the changes might be,” he told reporters on a visit to a business conference in Liverpool.

Mr Osborne’s aides sought later to downplay his remarks, insisting that there were no firm proposals on employment law under discussion.

Nevertheless, his comments provoked a wave of anger from the unions, which accused him of harking back to Thatcherism. They also contrast with the recent appointment by David Cameron of an envoy to build links with the union movement.

Last month the Tory leader said that he was “delighted” to announce the appointment of Richard Balfe “to help develop our relations with the trade union and cooperative movement. I have always said that free enterprise and the cooperative principle are partners, not adversaries, and cooperatives have an important role to play in public service reform by bringing dynamism without the loss of public ethos,” the Tory leader said.

Mr Osborne, who spoke after addressing the British Chambers of Commerce annual conference, made his comments as industrial unrest was moving up the political agenda.

Serious disruption hit schools, Job-centres and benefits offices last week and this week a dispute over pensions closed the Grangemouth oil refinery.

Mr Osborne said that he had some sympathy for workers who faced the loss of final-salary pension schemes, as is the case at Grangemouth. But he blamed the Prime Minister for his actions as Chancellor when he made changes to pension taxation. He said: “The culprit is Gordon Brown after his pension tax raid which has put companies under enormous strain.”

The Shadow Chancellor also wanted to bring in more private sector companies to deliver public services to “change the culture of public services”, which he accused of being monolithic and vulnerable to strong unions.

He said: “Within a structure of providing free education and services, it would help to improve productivity and help make services less monolithic.” Mr Osborne said that a cultural change was necessary because the public services were not delivering, despite having received a considerable amount of public money.

Unions rounded on Mr Osborne’s threat of employment law reform. Brendan Barber, TUC General Secretary, said: “This is a serious gaffe. If Mr Osborne is saying that employees will no longer be able to defend themselves against cuts in their pensions, he is giving a green light to corporate raiders eyeing companies with well-funded pension schemes.

“The prospect of such a fundamental shift in industrial relations could well make responsible companies wonder whether they should keep a good pension scheme if it simply makes them more of a takeover target. Mr Osborne is seriously out of touch if he thinks people go on strike ‘at the drop of a hat’.

“The truth is that strike action is always a last resort, and employees only give up their pay in today’s world of mortgages and rising bills after considerable thought and due process involving a ballot and notice.”

Tony Woodley, joint general secretary of Unite, said: “These remarks show that David Cameron’s Tories are still wedded to the 1980s agenda of pri-vatisation and union bashing. It seems the modernisation of Tory thinking hasn’t yet begun.”

Dave Prentis, Unison’s general secretary, said: “Mr Osborne has just shown us the Tories’ true colours. They want to weight everything in fa-vour of big business. If they had their way, they would allow their business pals to get rich on the pickings of the public sector and leave the workforce undefended and at the mercy of market forces. No one, except the Tories, wants to go back to the bad old days of Thatcherism.”

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