Michael Howard promised £4 billion worth of tax cuts to voters today today as he tried to revive Conservative election prospects following a double blow over the weekend.

The cuts would be financed by a massive £35 billion reduction in Government spending, involving the abolition of 168 public bodies and the loss of 235,000 civil servants' jobs. But the Tory leader insisted this would not mean less money for key public services.

The Tories pledged to at least match Labour spending plans on the NHS, schools and transport and to spend more than Tony Blair plans to in the next few years on police, pensions and defence. The first tax cuts would be announced in a special budget within a month of the election.

Mr Howard said: "There is a clear choice at the next election: more waste and higher taxes under Tony Blair or value for money and lower taxes under the Conservatives. By cutting government down to size, we can ensure that the forgotten majority keep more of the money they work so hard to earn."

But Labour attempted to spoil Mr Howard's announcement by convening a press conference immediately before the Tories' own at which they accused the Conservative leader of "double counting" and said that massive cuts would have to be made in frontline services for the figures to tally.

"The Tories ought to have learned by now that the public aren’t daft," said Alan Milburn, Labour's election co-ordinator. "So when they hear Michael Howard promising tax cuts, and promising extra spending on schools and hospitals, they look upwards and see skies full of flying pigs - because they know their sums don’t add up."

There was no immediate confirmation from the Tories on which taxes would be reduced but Mr Howard believes the promise of tax cuts worth around £170 a year for each household in the UK will give the Conservatives a powerful tool as they battle to oust Labour in the election, expected in May. Mr Howard also warned that a third-term Labour administration would have to impose tax rises to fill a multi-billion pound hole in Treasury finances.

But Mr Howard's launch of the spending review by David James, the City troubleshooter, had already been overshadowed both by the defection from the Conservatives to Labour of Robert Jackson, the Wantage MP, and a survey of marginal seats for the News of the World which said that Labour was heading for a 160-seat majority.

Oliver Letwin, the Shadow Chancellor added: "We will spend more on what matters to the majority of people by cutting back on the rest. We will give patients a choice of a clean hospital. We will give parents a choice of a well-disciplined school. We will get crime under control."

The Tories calculate that around £23 billion of the money saved would be redirected to frontline priorities such as cleaning up hospitals, improving school discipline and recruiting an extra 40,000 police.

Another £8 billion would be devoted to "restoring stability in public finances" - probably by paying off part of the national debt - and the remaining £4 billion would be used to finance tax cuts for families and businesses.

Transport Secretary Alistair Darling, questioned the basis of the Tories' figures. He said: "Michael Howard yesterday admitted that £21 billion identified by Sir Peter Gershon's review (the Government's own review of potential efficiency savings) is already in his figures.

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