Osborne: I will not back down on tax cuts

George Osborne today insisted he would "not back down" to the right-wing of his party and promise tax cuts.

The shadow chancellor told the Conservative party conference in Bournemouth that he backed lower taxes because they would "help Britain to compete".

But he warned: "We must win the argument on the economy. We will never do that if people believe our tax policy comes at the expense of their public services."

Tory leader David Cameron and Mr Osborne have refused to promise tax cuts at the next election, arguing it is too early. They have only said they would "share the proceeds of growth" between public services and cuts in taxation.

Yesterday, former cabinet minister John Redwood published a pamphlet endorsed by almost 50 Conservative MPs saying tax cuts were an economic necessity. It also put the "moral case" that people should be allowed to spend more of their own money.

And at a fringe debate organised by the Daily Telegraph yesterday lunchtime, the 250 delegates present were split 60-40 in favour of lower taxes to boost economic growth.

However, today Mr Osborne's message was clear: "To those, the few of you, who still want us to make upfront promises of tax cuts now, we say – we will not back down.

"We will not be pushed or pulled. We will stick to our principles. We will do what is right. We are not going to write our 2009 budget in 2006."

He said that the Conservatives were now, for the first time in years, being judged as a future government. "So there are tests we have to pass – we have to show we are disciplined," he said.

Mr Osborne told delegates: "Let the message from this conference be this – we are tired of the luxury of opposition. We want the hard choices of government."

He noted that Margaret Thatcher knew the importance of stability over tax cuts, warning: "Let no-one ever portray sound money as a betrayal of Conservative principles. For sound money is the oldest Conservative principle of all."

The shadow chancellor also indicated that the party's tax commission, which is due to report later this month, would look at how to "rebalance" the tax system to shift the burden from families, jobs and investment onto pollution and carbon emissions.

"We will tax the bad not the good, that will be our approach," he said.

And Mr Osborne delivered a message to the Eurosceptics in his party, saying that the lessons of Black Wednesday – when Britain had to pull out of the Exchange Rate Mechanism (ERM) in 1992 causing interest rates to soar – had been learnt.

"I want people to know this from us – we will never link our currency to join the euro. I want people to know this from us – that we will never take risks with inflation or interest rates," he said.

"I want people to hear this party say with one voice that economic stability will always come first."