Osborne's plan to freeze council tax delights party

Council tax bills would be frozen for two years if the Tories win the next election, the shadow Chancellor, George Osborne, said yesterday.

His surprise announcement at the Tory conference in Birmingham delighted party activists, many of whom are keen to see tax cuts. But the move ran into immediate controversy, with Labour attacking it as a "con" and claiming it would help the rich more than the poor.

The Tory proposal would save a typical band D household more than £200. However, the government would provide extra funding to keep down bills only if local authorities kept their council tax rises to 2.5 per cent or below – in effect wiping out the increase.

Mr Osborne said: "The country may not be able to afford upfront tax cuts because borrowing is too high but families facing the squeeze cannot afford tax rises either. So we're going to go into partnership with local councils. If they find matching savings in their town hall, we will give them these savings from Whitehall."

He promised: "The next Conservative government will freeze your council tax for at least two years. Every council tax bill of every family in every council that takes part will be frozen.

"Instead of council tax bills that rise year after year under Labour, millions of families will get help at the time they need it most. Conservatives will not leave people to struggle with the credit crunch alone. We won't walk on by. We will help families over this crisis."

A Tory government would find the £1.5bn needed by cutting "wasteful" Whitehall spending on consultants and advertising campaigns, the shadow Chancellor said.

Asked later how councils would be able to hit the 2.5 per cent target, Mr Osborne said: "I think there's plenty of opportunity in local government – as there is in central government – to find savings." He added: "I think this is exactly what the country wants to hear at a time of enormous anxiety." The Tories denied their move would be regressive, insisting that people on middle incomes would benefit most.

But Yvette Cooper, the Chief Treasury Secretary, said: "George Osborne's council tax pledge is a con – it could only be introduced if local councils make big cuts in public services. They have failed to set out where any savings would come from."

In his speech, Mr Osborne hardened the Tory line on bad practices in the City. Calling for a new culture of responsibility, he told financiers: "If you pay yourself sums far beyond what anyone else in any walk of life does, then be prepared to lose it when you make mistakes."

The shadow Chancellor said there been "terrible failures of regulation" in the markets and the Government should take its share of the responsibility. But he added: "In the end the failures of the banking industry are the failures of the bankers." He said: "I will not increase taxes on a family earning £20,000 to carry on paying bonuses to a banker earning £2m."

The Prime Minister had blamed the Tories for "casino capitalism" when he had been the one "running the casino and collecting in the chips for the past 10 years", he said.

Mr Osborne added it was his party's aspiration to have lower taxes at the end of a term in office than at the start, but told those Tories hoping for immediate tax cuts they would be disappointed because "the cupboard is bare".

He said: "There is no more money. Tax revenues have collapsed. Unemployment costs are rising, borrowing is out of control. Labour has done it again. It is no good us talking about the big, upfront, tax giveaways we might like to make or the big spending increases it might be nice to have because, I repeat: there is no more money."

Mr Osborne said that the Tories would offer a change from Labour's "age of irresponsibility" to a new "Conservative age of responsibility". But Labour hit back last night by accusing the Conservatives of making "irresponsible" spending commitments totalling £4.8bn at the conference. The shadow Chancellor struck an upbeat note about Britain's prospects, saying: "I believe that the best years of this country lie ahead, not behind."

David Cameron's refusal to rule out tax rises was described as a "disaster" by a senior Tory backbencher. Edward Leigh, chairman of the Commons Public Accounts Committee, insisted an incoming Conservative government should not allow itself to become the victim of Labour's "scorched earth" approach to public finances.

He warned that Tory administrations ended up "dead" if they increased the tax burden. "We have before us the appalling prospect of an incoming Conservative government being forced to put up taxes in 2010," he wrote in an article for the right-wing Cornerstone group.

"It would be disastrous if an incoming Conservative government had to raise taxes. As President George Bush Snr and John Major found, Conservative governments that raise taxes long-term are dead Conservative governments," Mr Leigh said. He urged Tory leaders to "cut loose" from the "ball and chain of Labour's tax-and-spend approach".

Taxing times: Tory plans

*Incoming Tory government would freeze council tax bills for two years for local authorities that keep their proposed rise to 2.5 per cent or below

*Councils planning increase of less than 2.5 per cent could cut rather than freeze their bills

*Freeze would save average band D household £70 in first year and £140 in second

*Central government would find the £1.5bn for the subsidy by cutting Whitehall spending on consultants and advertising

*Conservatives would set upindependent Office for Budget Responsibility to "force" Chancellor to balance nation's books "or face the public consequences".