Osborne on spending cuts: 'Gordon Brown will hoist the white flag'
George Osborne has said the Tories have won the "biggest economic argument" and accused Gordon Brown of a "complete capitulation" on the spending row.
The shadow chancellor said the PM would "hoist that white flag" in admitting cuts were necessary to address debt.
He accused Mr Brown of a "dangerous fantasy" in his economic recovery plans and of being "weak" with the unions.
Labour says the Tories are "foaming at the mouth with excitement" at the prospect of "savage" cuts.
Mr Osborne, in a speech to the Spectator conference, said a "sustainable recovery" should be based on "rebalancing our economy away from debt and towards saving and long term investment".
He accused the government of seeking to "try and pump the bubble back up with more government spending and debt-fuelled consumption".
"As with our failed system of financial regulation, or our broken politics, they seem to think we can carry on much as before, with a few tweaks here and there. That is not just the wrong conclusion, it is a dangerous fantasy," he said.
Mr Osborne said the prime minister - who gave his own speech to the TUC on Tuesday - should have told them a "decade of uncontrolled spending" had left Britain with "unsustainable debts" which had to be dealt with.
In the end a Labour government will be forced ... to hike up taxes and impose across-the-board cuts in frontline public services
"Instead we have a weak and desperate Labour leader who is putting fixing the finances of his party ahead of fixing the finances of the country," he said.
"Favours not fairness is what Gordon Brown is promising the trade unions - and it is the British people who will pay the high price for this grubby bargain."
Mr Brown told the TUC that he would "cut costs, cut inefficiencies, cut unnecessary programmes and cut lower priority budgets" - the first time he has admitted spending cuts will be needed.
Previously he had concentrated on contrasting "Labour investment" with "Tory cuts".
Mr Osborne said that was a "complete capitulation" and it was the Tories who had won "the biggest economic argument of the day".
"For months we endured the onslaught of Gordon Brown and Labour cabinet ministers as they spoke in apocalyptic terms about what would happen if you cut spending," he said.
"We have shown in the way we have conducted ourselves that we now command the centre of British politics, and we have the character, the judgement and the courage to take this country through the difficult times ahead."
He said if Labour retains power at the next election, national debt would "spiral still further out of control", leading to higher interest rates "damaging the recovery and destroying jobs".
"In the end a Labour government will be forced by a combination of mounting interest bills at home and a loss of international confidence abroad, to hike up taxes and impose across-the-board cuts in frontline public services.
"We have been there before with Labour in the 1970s. We will be there again with Labour if, by some chance, they cling on."
Downing Street has downplayed the significance of the word "cuts", a spokesman saying the prime minister had always been clear about the need for tough spending choices and the speech was consistent with that.
Mr Brown also said the economic recovery was "fragile" and warned voters not to put it at risk by voting in the Conservatives at the next general election.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.