Osborne accuses Brown of abandoning prudence

The Conservatives vowed yesterday to cut the proportion of national income spent by the government as they pledged a significant increase in the proportion of public services operated by private firms.

George Osborne, the shadow Chancellor, said he would lift the "arbitrary " limit on the amount of NHS work performed by the private sector.

He used a speech in London to pledge an increasing role for the market in public services, warning: "You have to expose people to the consequences of failure and the rewards of success. That does not happen enough in the public sector."

He accused the Chancellor, Gordon Brown, of "swapping prudence for promiscuity" by increasing public spending by 40 per cent in real terms since 1997, and said the Conservatives would strip the Treasury of its responsibility for child benefits and tax credits.

"The central challenge of all public service reform is this: how do you provide incentives to improve what is in effect a monopoly?" he said. "As we have seen, the Chancellor thinks the answer lies in centrally set targets. I believe that the answer lies in a totally different approach, choice and contestability"

Mr Osborne pledged: "The share of the nation's income consumed by the state has risen by a staggering five percentage points to 42 per cent of GDP. We will bring that share down."

His remarks sparked an immediate backlash from Labour. Stephen Timms, the Chief Secretary to the Treasury, said: "George Osborne's speech shows that for all the talk of change, the Tories are wedded to the same old ideology of public spending cuts regardless of the needs of public services."

He added: "The Tories are now committed as a matter of policy to reducing the share of national income spent on public services over the course of the economic cycle, a policy that would mean spending £17bn less this year on public services."

Mr Osborne attacked Mr Brown for focusing too much on central control of public services. He said: "We need a completely different approach from the current Chancellor's empire-building and micro-management. The Treasury should focus on its primary responsibility of exercising a tight rein on public expenditure.

"It will need to do that if we are to achieve our goal of sharing the proceeds of growth so that the share of national income consumed by government falls over an economic cycle.

"We should look hard at removing the spending responsibilities which the Treasury has accumulated under Gordon Brown for in-work and universal child benefits. Otherwise, who guards the guardian? The only caveat is that we must make sure that this can be done without adding further to the chaos of the administration of tax credits," Mr Osborne said.

Brown on Osborne

"Having heard your speeches, I have not been brutal enough. They say the Conservatives are about to skip one generation. Perhaps it is time they skipped another one." Pre-Budget Report, 5 December 2005.

"This is the shadow Chancellor who congratulated me on Labour's success on macro-economic policy." Commons Question Time, 11 May 2006.

"There are cracks already so wide that ... even the heir to a wallpaper empire cannot paper over them." House of Commons, 26 May 2005.

Osborne on Brown

"After two years of sticking to Conservative spending plans, Brown swapped prudence for promiscuity." Speech to Policy Exchange yesterday.

"A Chancellor who has had to wait so long to go to No 10 that his reputation at No 11 is crumbling." Reply to Pre-Budget Report, 5 December 2005

"This Chancellor is always around to take the credit ... and happy to let others take the blame ... Prime Ministers need many qualities. Political cowardice is not one of them." Tax Credits debate, 6 June 2006