David Cameron will unveil a package of tax breaks for employers and employees today after pledging that the Conservatives would not “walk on by” as dole queues lengthened.

The Tory leader hopes to regain the initiative and satisfy a growing Tory clamour for tax cuts with proposals to make it easier for companies to take on previously unemployed workers. The cuts would be funded from cash that would otherwise have been spent on paying jobseeker's allowance and other benefits.

The package, which would cost several billions of pounds to implement, is also expected to include reducing national insurance payments for those at risk of losing their jobs.

The Conservatives oppose the use of increased public borrowing to jump-start Britain's faltering economy. But Mr Cameron and George Osborne, the Shadow Chancellor, have brought forward their own plans in anticipation of tax cuts to be unveiled by the Government this month.

Mr Cameron gave a broad hint of targeted cuts to national insurance contributions yesterday, saying the package would “help to encourage businesses to take on workers and to keep workers”. He said, after addressing the Conservative Women's Organisation: “We will help, we will put money back in people's pockets and we will say where it will come from.”

With the latest figures showing numbers without work jumping by 164,000 to 1.79million, Mr Cameron said redundancy fears were the biggest worry facing many households today.

Claiming both compassion and responsibility as Conservative values, Mr Cameron said that both dictated action in the face of the looming “social disaster” of mass unemployment.

“There's a certain approach to this which says that, however painful this may be, large-scale unemployment is an unavoidable consequence of recession, that because it's the natural movement of the markets, all that Government can do is stand by and pick up the pieces,” he said in his speech. “I am not one of those people. In fact, I wholly disagree. Today I want to say that the Conservative Party will not stand aside and allow unemployment to claim livelihoods and ruin lives on a massive scale. We will not walk on by while people lose their jobs.”

Instead, he insisted, the Government had a moral obligation to help those whose jobs were threatened or lost through no fault of their own.

The global economic crisis has coincided with a slide in the Conservatives' poll position, leading to increased pressure for the party to outflank Labour on taxation. Grassroot approval of Mr Osborne, as measured by an activists' website, collapsed dramatically in recent weeks.

Mr Cameron acknowledged his party's frustration yesterday, saying that the party was being “tested by events”. Today's launch, he and Mr Osborne hope, will provide a platform to take on Gordon Brown's claim that only Labour can help people through the downturn. Key to its success will be the claim that the Conservative package is fully funded. Senior Tories are confident that they can prove that the measures can be paid for by benefit savings and — crucially — will not pile further debt on to public borrowing.

Labour is likely to claim that the Tories have already earmarked benefit savings for welfare reform and the introduction of a married couples' tax allowance, however.

Mr Osborne previewed the debate yesterday, claiming that the Conservatives were now the “only party of fiscal responsibility and prudence”.

“Lower taxes would help families in these difficult times but they should be properly funded. We should do the hard and honest work in identifying how lower taxes can be paid for.”

A Conservative source said funding for today's tax plans had been based on estimated benefits savings contained in a report from the Government's welfare adviser, David Freud.

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