Council tax bills would be frozen for two years under Conservative proposals aimed at helping middle-income families to cope with the economic downturn. The tax freeze would mean a saving of £70 in the first year for an average household in a Band D property and £140 in the second year, according to George Osborne, the Shadow Chancellor.

It would be paid for from cuts to Whitehall consultancy fees and advertising budgets as well as from savings by local authorities themselves, he said, although critics attacked the move as a squeeze on local services provided by councils.

Mr Osborne told representatives at the party's conference in Birmingham that Gordon Brown had left the cupboard bare. But while there was no money for tax cuts, “families facing the squeeze cannot afford tax rises either”.

Unveiling his surprise pledge, Mr Osborne said: “Conservatives will not leave people to struggle with the credit crunch alone. We will not walk on by.”

The Shadow Chancellor mocked Mr Brown's claims that he was the best man to lead Britain through the economic downturn. “You're the man who's been running the casino and collecting in all the chips for the past 11 years,” he said.

The Shadow Chancellor also acknowledged public anger over the conduct of some in the City, warning bankers who made mistakes not to expect bailouts from a Tory administration. “I will not increase taxes on the family earning £20,000 to carry on paying the bonuses of the banker earning £2 million,” he said.

In a generally sombre speech, Mr Osborne warned his party that Britain faced a “hard road ahead” with little or no scope for tax cuts and tight public spending. The priority of an incoming Tory administration would be to reduce debt, he confirmed. It would be determined to “live within its means”.

While promising to “put sound money first”, he insisted that it was right to find savings to “help families cope with this crisis”. Presenting what he said was a partnership with local government, Mr Osborne said that if a local authority could limit its budgeted council tax rise to 2.5 per cent or below he would provide the money to ensure that the proposed rise was not passed on to council tax payers.

Councils that accepted the proposal would be able to offer council tax payers a freeze or even a reduction for two years in a row. Mr Osborne said that he expected a 100 per cent take-up, costing the Treasury about £500million in the first year and £1billion in subsequent years.

Local government organisations said that town halls would have to make swingeing cuts in services to qualify for the freeze. Critics also pointed out that the poorest third of families would benefit less than middle-income households.

According to the Conservatives, council tax in England has more than doubled under Labour, with the average bill rising to £1,374 a year.

Local government experts hailed the move as politically astute. “It's a palliative rather than a brilliant reform, but it hits at one of Labour's weaknesses,” Tony Travers, of the London School of Economics, said. “The Conservatives can now go into the next election saying, ‘Vote Labour you will pay 5 per cent council tax. Vote Conservative and you will pay zero.”

However, Sir Jeremy Beecham, leader of the Local Government Association's Labour group, said: “The Tories' short-lived claims to be a party of social justice have fallen at the first hurdle. Local councils must be able to help people struggling with housing, people caring for vulnerable relatives, or those looking to wipe out gang violence. Slashing a billion pounds from council budgets [over two years] will put vital programmes at risk.”

An analysis by the Institute for Fiscal Studies, released by the Tories, suggested that while there would be winners in every income band, the middle groups would be the biggest beneficiaries and the poorest third of families among those who gained the least.

The move comes as the latest opinion poll confirms a narrowing of the Tory lead over Labour. The ComRes/Independent poll has the Conservatives on 41 per cent and Labour on 29 per cent. The 12-point lead compares with a gap of 19 last month.

CONFERENCE DIARY

Fresh signs of tension between David Cameron and Boris Johnson. Having dismissed Cameron’s “broken society” label, the Mayor made things worse with a homily to City bankers and hedge fund managers. “I do not believe that the best way of protecting the mortgage holders of London is to launch a vindictive attack on one of the most successful industries in this country,” he said — not George Osborne’s tone yesterday. No wonder Boris was stopped from doing media interviews.

A former Tory press officer, Ashish Prashar, has declared in the New Statesman: “The Tories talk about social mobility and opportunity for all. This is hard to believe when the party itself hasn’t changed at the core.” A Tory spokesman said: “Throughout his time with us he praised David Cameron to the skies and never once complained about the way the party was run.”

David Cameron may think it, but few of his colleagues would dare pronounce their leader to be the heir to Blair. Except Oliver Letwin. When it was put to the party’s policy enforcer that, on education and welfare, the Tories were pursuing the agenda championed by Tony Blair, Mr Letwin replied: “I think that is exactly what we are doing.” The Right will not be pleased . . .

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