George Osborne drew battle lines for the next general election today by warning that the Government's “spending splurge” risked further entrenching the economic mess which he claimed a decade of Labour policies had brought about.

In his first speech since acknowledging his errors in the Deripaska affair, the Shadow Chancellor branded Gordon Brown “irresponsible” for suggesting the Government can “borrow without limit” to stave off recession and pledged that his party would return the country to financial health.

Characterising Government plans as “a cruise missile aimed at the heart of the economy”, he said voters had a choice between future Labour tax hikes to repay the huge national debt that would inevitably be racked up, or a Tory “responsible road to recovery” which will eventually bring down taxes, he said.

Mr Osborne delivered his broadside in a lecture at the London School of Economics, as political dividing lines sharpen over how to counter the slowdown.

David Cameron, the party leader, repeatedly taunted Mr Brown at Prime Minister’s Questions this week over the “death” of his fiscal rules on borrowing.

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

Mr Osborne drew parallels with “failed and discredited” Keynesian demand management techniques which led to soaring inflation in the 1970s.

The move would make it more difficult for the Bank of England to achieve the “sustained reduction in interest rates" which Mr Osborne said was essential to return the country to economic health.

Increasing borrowing to boost state spending by just 1 per cent of GDP would mean future tax hikes equivalent to 4p on income tax, he claimed.

“It saddles this generation and the next with a burden of debt that could take a decade or more to pay off,” the Shadow Chancellor warned.

“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.”

Laying out what he said was a clear choice for the electorate, Mr Osborne argued that instead of allowing debt to spiral, aggressive cuts in interest rates and measures such as council tax freezes and reductions in small business taxes were the best way to tackle the economic crisis - which this week Mr Brown admitted had become a full-blown recession.

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