George Osborne said today that after 12 years of Labour’s “feckless irresponsibility” a Conservative government would introduce a public sector pay freeze and cut the cost of Whitehall by a third over five years.

The Shadow Chancellor told the Tory party conference “we are all in this together” as he outlined a raft of savings that would affect Westminster and families from all income brackets.

Mr Osborne said the Conservatives would scrap the bulk of Baby Bonds – retaining the payments for only the poorest families. He said that there would be no tax credits for families with incomes over £50,000 and accepted that the party “could not even think about abolishing the 50p rate” in the current climate.

“Our country is facing the largest budget deficit in modern history,” he told delegates. “Labour created this mess and we Conservatives are going to have to sort it out.”

Expert View

There were plenty of attacks on Labour's handling of the economy, and here Mr Osborne certainly had plenty of ammunition to fire

Ian King

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Mr Osborne said it was time to restructure the British economy to one of saving and investment, not spending and borrowing.

“We are sinking in a sea of debt,” he said. “The Government borrowed too much, banks borrowed too much and, let’s be honest, we borrowed too much.”

The man many expect to move into Number 11 next year labelled Alistair Darling and Gordon Brown as a “disgrace”. He joked that the Prime Minister called Alastair Darling a great Chancellor just three months after almost sacking him.

“What does it say about Gordon Brown that he got into a trial of strength with Alistair Darling, and lost,” he told cheering party members. “The Iron Chancellor has turned into the plastic Prime Minister. These Labour Party politicians are better at writing books about courage than displaying it.”

The Shadow Chancellor conceded that inheritance tax would not feature in the first Budget but would be pushed back in the Parliament timescale.

He said that he would cut the pay of ministers by five per cent and then freeze it for the rest of Parliament, adding that a Conservative government would cut the number of MPs by ten per cent and close its unaffordable pension scheme to new members.

Mr Osborne said that excessive public salaries at the top would have to go – anyone wishing to pay a public servant more than the Prime Minister would have to put it before the Chancellor. “I’m not expecting a big queue,” he said.

And he added he would cut the cost of Whitehall by a third and freeze public sector pay for a year for all but those earning less than £18,000. He claimed that the scheme, which goes beyond Mr Darling’s call for a freeze for the 750,000 highest-paid public servants, was equivalent to saving 100,000 frontline public sector jobs.

Mr Osborne’s plans were met with scorn from leaders representing teachers, doctors, dentists and senior civil servants.

One union leader threatened public sector strike action while a spokesman for senior civil servants said the proposals were unworkable and in breach of contractual obligations.

Mr Osborne confirmed he would commission a review to raise the state retirement age from 65 to 66 in 2016, rather than 2026 as the Government plans. His announcement came hours after David Cameron was forced to reassure voters startled by party aides who had claimed last night that a Conservative government would make the change within seven years.

“The women’s pension age is already set to start rising over the next decade to 65. And by 2026 the pension age for men and women will reach 66,” Mr Osborne told the conference. “This is already happening. But most experts now think that is too far off.

“Our aim will be to bring forward the date when the pension age rises. For men this means the pension age will not start to rise to 66 until at least 2016. For women this means the pension age will not start to rise from 65 to 66 until at least 2020."

Mr Osborne also said that he would introduce steps to cut multibillion pound pension payouts to public servants earning over £50,000.

Liam Byrne, the Chief Secretary to the Treasury, said: “George Osborne appears intent on talking Britain down. We were told his speech would tell us ’everything’ we needed to know about how the Tories would get the deficit down. But he lost his nerve.

“As his proposed changes to the pensions system unravelled before the ink was dry, it was far from clear that this speech even pays for itself let alone matches our pledge to halve the deficit in four years.

“And how can George Osborne say ’we’re in this together’ and then recommit his party to a tax giveaway to the wealthiest 3,000 estates?”

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