Page last updated at 16:04 GMT, Friday, 6 March 2009

End 'money for nothing' - Osborne

George Osborne: This is a monetary crisis that requires monetary solutions

The UK's "money for nothing" culture must come to an end, shadow chancellor George Osborne has said.

In a speech in Birmingham, Mr Osborne argued that people needed to hear some "home truths" and must "work hard and save hard" to get out of the recession.

The Conservatives have said Labour has left the UK ill-prepared to deal with the recession and should apologise.

But Gordon Brown said the Conservatives would cut "vital" public spending, describing them as "out of touch".

Mr Osborne said an apology was necessary to show that Labour understood the current economic problems were home-grown, rather than a result of the meltdown of the US mortgage market, and had learnt the lessons of what had happened.

"He [Gordon Brown] won't say sorry for his mistakes because he really doesn't think he made any," he said.

But in a speech in Dundee, Gordon Brown said the financial crisis was a global one and that there had been "irresponsibility and excess in every corner of the world".

He said banks needed to be reformed to ensure that "good and hard-working" families did not continue to be "squeezed" and to leave them in fear of their jobs and livelihoods.

He also said there was an "emerging consensus" on the need for tougher, cross-border regulation and supervision of financial markets to ensure they worked in the public interest.

"It has become ever clearer you cannot privatise or deregulate your way out of these problems," he said, adding that money markets needed to have a moral foundation.

'Worst excesses'

Mr Osborne linked the regulatory failures which allowed banks to take unjustified risks to a general culture of excess which encouraged individuals to build up unsustainable levels of debt.

"Our banking system is not separate from our economy," he told the Birmingham Chamber of Commerce.

The Conservatives are ready to tell people these home truths and the country is ready to hear them
George Osborne

"Our banks hold up a mirror to the worst excesses of society."

He said people need to become more prudent in future and will no longer be able to rely on the rising value of their home to pay for their retirement.

"The money for nothing society has to end," he stated.

"The truth is that Britain is going to have to work hard and save hard to get out of this hole. The Conservatives are ready to tell people these home truths and the country is ready to hear them."

Mr Osborne called for the "recapitalisation" of the whole of British business, not just leading banks - a policy which the Conservatives claim has failed.

He said the tax system, which treats corporate debt "more generously" than any other major global economy, needed to be reformed to encourage less risky forms of finance.

More incentives for share ownership and equity investment in business start-ups and existing firms are needed, he added.

By limiting tax breaks on debt, a future Tory government could commit to further reductions in the basic rate of corporation tax beyond their existing pledge to cut it from 28% to 25%.

"The prize could be considerable," he argued. "A simpler and more competitive tax system, more jobs and investment and British businesses that are less dependent on debt."

Earlier Mr Osborne visited carmaker Jaguar, whose workers recently agreed to accept a shorter working week and a one-year pay freeze to avoid compulsory job cuts.

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