Ken Clarke promised a nightclub-style “one in, one out’ policy on new rules on business today, vowing that a Tory government would introduce no new regulation without getting rid of an old law.

The Shadow Business Secretary also promised that quangos would be automatically abolished unless they proved that they were still useful. The public would also be able to nominate unpopular laws for parliament to debate, Mr Clarke told the Conservative Party conference.

“We will introduce a system of regulatory budgets across government, that means no new red tape will be introduced without a compensating cut in the costs and burden somewhere else,” Mr Clarke said.

He would serve as a "bouncer" to prevent red tape from reaching the statute book, promising to chair a new body to scrutinise regulation.

Mr Clarke has recruited Richard Thaler to join this "star chamber". Professor Thaler, a US economist, is co-author of Nudge, a favourite work of David Cameron, which sets out a policy of “libertarian paternalism”.

Mr Clarke added: “We will give each regulator and quango a sunset clause. That means they will automatically cease to exist after a set period unless they can prove their continuing usefulness.”

He warned that a Tory government would “take over the biggest mess that a Conservative Party has ever inherited from a Labour Government.” Only successful businesses could supply the revenue to clear up that mess, he said, and that meant cutting red tape.

Claiming that small businesses now spend seven hours a week on form-filling, he declared: “The excessive regulation that businesses – and the great public services – face, has to be swept away.”

In a well-received speech, Mr Clarke repeatedly emphasised that the instinct of the Tory party was to cut regulation on business. His guiding principle would be “to make it easier for the small businessman in the Midlands to make his living, to produce a bit of prosperity and create some jobs,” he said.

“The question ministers must ask themselves is – are we making it easier for that businessman or businesswoman to thrive or not?”

He added: “The instinctive dislike that we Conservatives feel for excessive bureaucracy is anathema to Labour. One thing New Labour never lost was the idea that the gentleman in Whitehall knows best.”

He claimed that Labour had a “Puritan” belief in perfecting society. “The well-meaning nanny state is at the heart of this system,” he said. “Parliament churns out legislation like a sausage machine.”

He criticised the Government for allowing a third of Britain’s manufacturing to be lost over Labour’s time in power, saying: “Britain has to make things again.”

Mr Clarke also poked fun at Lord Mandelson, who gave an animated speech at the Labour conference in Brighton last week. “Peter Mandelson displayed theatrical talents which we never suspected last week. I hope to free him next May for a theatrical career, and not just as a pantomime villain,” he said.

He also lamented the role that the Business Secretary played in quashing plots against Gordon Brown’s leadership. “But for Peter Mandelson, Britain would have thrown off the burden of Brown as Prime Minister,” he said.

“As one comeback kid to another, Peter – why did you save Gordon Brown for the nation? The nation is not grateful.”

Times Recommends

• Should Knox’s trial even have reached the courtroom?
• All that glitters is not sold in Wright’s world
• Believe it or not, Big Brother is your friend