George Osborne lambasted Gordon Brown's approach to the recession, describing it yesterday as “a cruise missile aimed at the heart of the economy”, bringing to an end the Tory party's co-operation with the Government on the economic crisis.

Presenting a Tory alternative that he said would lead to bigger cuts in interest rates and eventually lower taxes, the Shadow Chancellor declared that Mr Brown's plan to “spend his way out of recession” risked aggravating the downturn. He added that Labour's policy could saddle future generations of Britons with huge tax increases, equivalent to 4p on income tax, and would also make it harder for the Bank of England to cut interest rates as much as it wanted or the country needed.

After an uneasy and not wholly observed truce over the banking crisis, Mr Osborne went back on the attack with a speech designed to show that the Tories would tackle the recession differently.

It was his first big speech since he admitted making mistakes over his contacts with Oleg Deripaska, the Russian tycoon, an episode that has damaged his authority in the eyes of Tory MPs. Mr Osborne called the Prime Minister irresponsible for suggesting that the Government can “borrow without limit” to stave off recession, in what was a clear attempt to get back on the offensive.

He accused Mr Brown of abandoning fiscal responsibility in favour of the “failed and discredited” Keynesian demand management techniques that led to soaring inflation in the 1970s.

In his half-hour address at the London School of Economics, Mr Osborne said that voters now have a clear choice between future Labour tax increases to repay huge national debt, or a Tory “responsible road to recovery” that will eventually bring down levies.

Mr Brown and Alistair Darling, the Chancellor, have insisted that they will allow government debt to rise and spend in a bid to keep the economy on track.

Mr Osborne said that this approach “saddles this generation and the next with a burden of debt that could take a decade or more to pay off”.

“It means you end up spending more on paying debt interest than defending your country or educating your children. It means damaging tax rises at the very moment when you want to be reducing taxes to help the recovery,” he said.

Angela Eagle, Labour's Treasury Minister, said: “The Tories remain totally confused on borrowing: first [they] called for borrowing to fall, then they said it was right to rise. Now George Osborne says he wants a limit but cannot say what that limit would be.”

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