Osborne rejects any switch to Plan B on economy

In his speech to delegates in Manchester, it is understood that Mr Osborne will say the current crisis was “made by human beings and can be solved by human beings”.

He will demand that the eurozone gets its house in order and say that resolving the crisis will provide the single biggest boost to tackling the economic problems around the world.

He will also tell conference that he will not bow to pressure to come up with an economic “Plan B” and will warn there is no turning away from the current austerity programme of more than £80 billion of cuts and £20bn of tax rises.

Tens of thousands of public-sector workers packed the streets of Manchester yesterday to protest against government cuts and reductions in their pensions.

But with rumours of a possible collapse of the Belgian Dexia Bank triggering another financial crisis, Mr Osborne will today make it clear he wants austerity measures to continue to make the UK a “safe haven”.

The Chancellor will, however, insist that there are things he can do to help put more money into the economy and encourage economic growth.

He will offer a council tax freeze in England, mimicking the SNP policy north of the Border, while he will seek to change employment law to limit the number of industrial tribunals faced by companies.

This will involve doubling the probation period to two years before an employee can claim for unfair dismissal, in a measure that was trailed earlier in the year.

Mr Osborne’s speech comes after Prime Minister David Cameron spent much of the first day of the conference yesterday calming nerves on the economy after the government’s policy was attacked by the Tory chairman of the Treasury select committee, Andrew Tyrie.

Mr Tyrie said the government’s economic response lacked a “coherent and credible” plan for growth.

But Mr Cameron insisted: “We are firing up the engines of the British economy. There is a step-change taking place right now. This government is not just sitting back.”

The premier suggested that as many as 200,000 extra homes and 400,000 extra jobs could be created under the twin-pronged housing strategy being trumpeted at the start of the conference.

Thousands of acres of publicly owned brownfield land south of the Border are to be released by the government for housebuilding, in an effort to support growth and improve affordability in the housing market.

Cash-strapped developers will be given the opportunity to pay for the land later, when properties are sold, thereby by-passing the lack of upfront finance.

Whitehall departments have been instructed to publish plans of previously developed land and empty offices that they can release for house-building.

In a move that is bound to please Tory activists, Mr Cameron also outlined plans to boost the “right to buy” scheme, which proved a huge vote-winner for Margaret Thatcher in the 1980s.

More attractive discounts will be offered – with the proceeds used to build more affordable housing, he said – further boosting job creation and growth.

The Scottish Government last year announced plans to end the right to buy north of the Border in an effort to improve the supply and quality of housing.

Getting the economy back on its feet will be a major theme for Cabinet ministers at the conference this week, as the recovery continues to flag.

Mr Cameron dismissed calls for “a few billions” of extra spending – suggesting it would be a dangerous gamble to “deviate” from the government’s tight deficit-reduction plans. Asked about Mr Tyrie’s eve-of-conference complaint and calls for business tax cuts, Mr Cameron said the government “can’t suddenly tear up our borrowing plans”.

Corporation tax had already been cut as part of efforts to boost business, the premier said, pointing to a 40 per cent rise in exports to China as a sign of economic health.

Since the election, there were also “half a million more private sector jobs”, he added, “so the economy is rebalancing” away from the public sector.

Meanwhile, a body of Tory MPs have flexed their muscles by launching a new free enterprise group aimed at further reducing regulation for businesses.

Speaking about the reasons for forming the group, Norfolk MP Elizabeth Truss said: “Britain’s success has been built on free enterprise. Yet Britain is now 83rd in the world for regulation, 94th for taxation and struggling to compete internationally on education and infrastructure. In many emerging economies, markets are viewed as a source of liberation; in Britain they are regarded with scepticism.

“In the minds of the public, the market is decoupled from meritocracy. Liberal economics have been blamed for everything from excessive bankers’ bonuses to misguided monetary policy.”

Shadow chief secretary to the Treasury Angela Eagle said the Tories needed to realise that growth was vital to get the deficit down.

“David Cameron is so out of touch with what’s happening to jobs and the cost of living that he seems more interested in protecting a plan that isn’t working than protecting our economy,” she said.

“With unemployment rising and the recovery choked off last autumn, the Prime Minister is stuck with the old lines and has nothing new to say.

“Labour has set out a clear five-point plan to boost jobs and growth, including tax breaks for small businesses taking on extra workers, a temporary VAT cut and bringing forward infrastructure investment.”

Ms Eagle added: “Instead of sitting on their hands, ministers should adopt one or more of Labour’s five measures to create jobs now.”

Foreign Secretary William Hague played down the prospects of tax cuts in the near future, insisting that the government would not waver in its determination to bring down Britain’s deficit.

Mr Hague declined to say whether the 50p top rate of income tax should be scrapped if a review by HM Revenue and Customs showed it was not bringing in any money, insisting that was a decision for the Chancellor.

But he said: “The answer to excessive borrowing and debt cannot be more borrowing and debt. We believe in the Conservative Party in lower taxes, but we believe also in having our budget under control, and that has always got to be the priority, otherwise we don’t have economic confidence.

“We mustn’t waver in any way that damages that confidence. This Chancellor won’t waver, this government won’t waver.”