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Last Updated: Tuesday, 21 June, 2005, 09:51 GMT 10:51 UK
Brown stuck in 90s says Osborne
George Osborne
Mr Osborne has ruled himself out of the leadership race
Chancellor Gordon Brown has no answers to the economic problems of the 21st Century, his Conservative shadow George Osborne has said.

He said Mr Brown was spending more than he was raising and would "almost certainly" have to increase taxes.

That meant Britain was heading "in the opposite direction of the rest of the developed world", which was cutting taxes to boost competitiveness.

Mr Osborne said he would cut business taxes and slow public spending growth.

'More competitive'

Mr Osborne has ruled himself out of the Conservative leadership race but is a close ally of potential candidate David Cameron.

Sometimes it looks as if the Conservative Party produces tax cuts like a white rabbit out of a hat just before polling day
George Osborne, shadow chancellor

His comments suggest the modernising wing of the party could be ready to mount a push on tax cuts to head off the challenge of David Davis, the bookies' favourite to succeed Michael Howard.

Mr Osborne told BBC Radio 4's Today programme: "We need to slow the growth of public expenditure.

"I also think we may need to look at a more competitive low-tax corporate environment, because the rest of the world is reducing its business taxes and we need to compete with the rest of the world.

"We also need a broader economic policy that does something about skills, about our transport infrastructure and issues like energy and encouraging new technologies like stem-cell research."

'Flat tax'

Mr Osborne said he was not persuaded of the case for a flat rate of income tax, which takes low paid workers out of the tax system altogether.

He said it was not appropriate for a "mature" tax economy like the UK, where taxes such as VAT and council tax had more of an impact on the poorest people than income tax.

But, he added he was shortly to visit Estonia, which has introduced such a system and seen it boost economic growth.

He said Britain had to compete for jobs in a global market and the example of Estonia showed that "other countries are producing low-tax, simpler tax environments, and we in this country are going to have to respond to that".

'Navel gazing'

Poor budget deficit figures for the first two months of this financial year suggested Mr Brown will have to raise taxes if he is to meet his so-called Golden Rule to balance the books over the economic cycle, said Mr Osborne.

"At a time when almost every other developed country in the world is reducing taxes to meet the big competitive challenges of China, India and the flat-tax revolution in Eastern Europe, we are heading in the exact opposite direction to the rest of the developed world.

"I think we are going to start to pay the price for that.

"Gordon Brown may have had the answers to the economic problems of the 1990s but I don't think he has got the answers for the 21st century."

He said the Conservatives had to have a long-term economic plan to reduce the tax burden.

"Sometimes it looks as if the Conservative Party produces tax cuts like a white rabbit out of a hat just before polling day.

"Actually, what we need to do is to have a broad economic policy in which tax plays its part."

He also warned the party against "navel gazing" and urged it to address "real world" challenges and show the government was "outdated" and "running out of steam".

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