Conservative conference

Watchdog to stop 'credit binges'

The Tories will promise new help today to get Britons through difficult times and a massive overhaul of the public finances to prevent 'credit binges' wrecking the economy.

George Osborne, the shadow chancellor, will pledge to bring Britain back into the black if the Tories win the next election, with an independent watchdog to force the new government to balance its books.

He will also unveil plans to prevent unsustainable credit bubbles by giving the Bank of England new powers to influence lending policies, ensuring that mortgages are sold less recklessly in boom years but that lending does not then dry up in a bust.

Last night there was speculation that the Tories could also unveil a surprise pledge to cut council tax. Boris Johnson, London's mayor, will announce today that he will freeze the portion of Londoners' council tax bills levied to fund City Hall, but David Cameron is under pressure from MPs to go further.

Mixed messages were already emerging over the City last night however. Michael Gove, the shadow education secretary, signalled a shift from the championing of free markets telling The Observer that Cameron and Osborne knew the markets 'need tough and effective regulation and people looking at what's been happening. All sorts of behaviour was allowed that was not in the public interest.'

But Johnson will warn today against punitive City regulation making it less competitive. 'We are not going to attack the wealth creators,' said a source close to him.

Osborne will unveil plans today for the watchdog, which would publish an audit of hidden government debts held off-balance sheet and force the Treasury to cut government spending. The Bank of England would also report regularly to regulator the Financial Services Authority on economic risks including personal debt levels, guiding decisions on when to curb bank lending. Cameron said the plans showed voters 'your money is safe with us'.

Cameron will argue a Tory administration would 'put something away' during good times for a rainy day. Lord Burns, the former permanent secretary to the Treasury while Brown was Chancellor, has advised the Tories on their reforms. They will work with eminent economists including Sir Alan Budd, a former chief economist at the Treasury, to develop them.

Osborne will not put a timescale on the pledge to get Britain back in the black, arguing it will depend on how much debt Labour has built up by the next election. But the move is likely to please Tory right-wingers who want to see 'clear blue water' between Cameron and Brown.

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