A Conservative government would start cutting back on state spending immediately after taking office if it wins this year's general election, shadow chancellor George Osborne has declared.
For the first time, Mr Osborne said the Tories would be ready to make in-year reductions in Labour's £707 billion spending plans for 2010/11, set out in last month's Pre-Budget Report.
He named spending on advertising and consultants, tax credits for people earning more than £50,000 and Child Trust Funds for better-off families as items which would be cut during the coming financial year.
An emergency budget as early as June could wipe out the departmental budgets outlined in Labour's final budget just weeks earlier.
The Conservatives criticised Chancellor Alistair Darling for announcing a 2% real-terms increase in state spending in the PBR, rather than finding savings to start reducing Britain's record £178 billion annual deficit. But they previously stopped short of confirming they would make early reductions to existing 2010/11 budgets if the election happens after the start of the financial year in April.
Mr Osborne made his announcement in an appearance at the London School of Economics alongside Swedish Finance Minister Anders Borg, the driving force behind a swift programme of cuts in the Scandinavian country's budget in the early 1990s, when departments were required to find year-on-year savings of 11%-12% to bring down a massive state deficit.
The shadow chancellor warned there was a "clear and present danger" that the Government's failure to signal early measures to shore up the public finances will dent confidence in British economic policy. Delay in cutting back spending could damage the UK's credibility on the international markets, pushing up interest rates and making mortgages more expensive, he warned. "The message could not be clearer - if you find yourself on the wrong road, you take the first available exit instead of carrying on," said Mr Osborne. "Anders Borg speaks about how fiscal consolidation in countries with weak public finances needs to begin as soon as possible. As he puts it so well, the longer one waits with the heavy lifting, the more difficult it becomes. I agree with him and the emerging international consensus that acting early helps to establish credibility, which will in turn help to keep interest rates lower for longer and support a strong recovery."
Chief Secretary to the Treasury Liam Byrne said: "What is clear is that in his rush to cut spending in 2010, George Osborne would put the recovery in grave danger. But until he says how he'll do it and whether he'll match Labour's pledge to halve the deficit in four years, his speeches must be taken with a huge pinch of salt. Tonight was another missed opportunity to come clean on how he'll pay for the £34 billion of unfunded tax and spending policies which he let the Shadow Cabinet run up while he was too busy running the Tory election campaign to keep them under control."
Liberal Democrat Treasury spokesman Vince Cable said: "Nobody doubts that serious budget discipline will be required in the coming years in order for Britain to maintain its creditworthiness, but it's foolish to set a political timetable with no regard for the state of the economy. There's a big risk that if cuts begin suddenly and on a purely political basis that the economy will be plunged back into prolonged recession.
"What is needed is a set of clear economic tests, which include the growth of the economy and employment, as well as conditions in international markets, to judge when contraction of spending should begin or be accelerated."