Mr Osborne has promised to make economic stability the priority

Osborne on spending

He pledged two years of 2% increases. The final year total would be reviewed.

He told the BBC he wanted to see a shift in taxation from income being taxed to pollution being taxed.

But Chancellor Alistair Darling said the Tories had given a "panicked response" to Labour's plans and that the sums did not "add up".

'No up-front tax cuts'

Mr Osborne said government spending under the Conservatives would rise from £615bn next year to £674bn in 2010/11. He said, like Labour, the final year total would be reviewed in 2009.

He said the move would create "headroom" for lower taxes because the economy is expected to grow faster than public spending.

Mr Osborne said: "The result of adopting these spending totals is that under a Conservative government there will be real increases in spending on public services, year after year.

"The charge from our opponents that we will cut services becomes transparently false."

He added: "At the same time the share of national income taken by the state will start to fall, as the economy grows faster than the government does.

Any reduction we offer in one tax will have to be matched by a tax rise elsewhere

George Osborne, shadow chancellor

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"Pursuing this approach over an economic cycle creates the headroom for sustainably lower taxes."

He added no unfunded tax cuts would be promised at the next election.

He said: "There will also be no election promises of up-front, unfunded tax cuts.

"Any reduction we offer in one tax will have to be matched by a tax rise elsewhere."

Mrr Darling dismissed Mr Osborne's announcement, saying the Tories would not be able to make good their promises.

'Panicked response'

"In recent weeks the Conservatives have been proposing tax cuts amounting to £21bn," he said in a statement.

"Now they claim they can match Labour on public spending. They can't and their sums don't add up.

"This is the latest panicked response from the Conservative Party who have simply not thought their arguments through."

Mr Osborne's announcement came as it emerged Johan Eliasch had resigned as a deputy treasurer of the Conservatives.

Gordon Brown said he wanted to reach out to new supporters

A Tory spokesman said the sportswear tycoon - who loaned the party £2.6m - would continue to offer financial and political support.

But a report in The Times said the businessman had quit his post because of Tory leader David Cameron's "lurch to the right" in policy making.

A Conservative spokesman said: "He has resigned because he didn't feel he had time to do the job properly."

Election speculation

Mr Osborne told BBC Radio 4's Today that Mr Eliasch wanted to spend more time concentrating on combating climate change.

Meanwhile the prime minister has told the Daily Telegraph he wants to attract support from non-Labour voters.

Gordon Brown's interview has increased speculation he could call a general election in the autumn.

In Mr Brown's wide-ranging Telegraph interview he said he wanted to attract people not thought of traditionally as Labour supporters.

He said: "I see British politics as us always seeking to unite and to be part of an enlarged centre ground.

"And us reaching out to those who might not be thought of as our supporters or identified with us.

"By showing them that we can meet these challenges we can have a better country and have a more positive view of the future of Britain."