The opposition Conservatives said yesterday they would exempt most Britons from a planned payroll tax rise, helping to fund the measure through efficiency savings worth £6 billion.
In a tax pledge aimed at wooing voters in an election expected on May 6, the Conservatives said they would cut spending in 2010-11 by renegotiating deals with suppliers, keeping tighter control on recruitment and other measures.
The Conservatives, who vow to cut the deficit harder and faster than ruling Labour, said this would give them headroom to exempt seven out of 10 workers from a planned one percentage point rise in National Insurance due to take effect in April 2011.
The party said those savings would also allow them to cut government borrowing in the 2010-11 financial year.
Labour, in power since 1997 but trailing in opinion polls, accused the Conservatives of making promises they could not deliver.
The rise in payroll tax for workers and employers is a key part of Labour's pledge to halve the record budget deficit within four years.
"Identifying the £6 billion of savings in 2010 gives me the confidence that... we will be able to act more quickly on the deficit and at the same time avoid the most damaging part of (Prime Minister) Gordon Brown's national insurance tax rise," opposition finance spokesman George Osborne told reporters.
The cost of lifting most workers out of the National Insurance rise would be £5.6 billion, he said, citing estimates from the independent Institute for Fiscal Studies.
Finance minister Alistair Darling said that Mr Osborne and Conservative leader David Cameron could not be believed.
"What is incredible are the claims that George Osborne is now making promising to spend billions of pounds in the next Parliament when he hasn't got a single penny in the bank to do it," Mr Darling told Sky News.
Mr Osborne said action was needed in 2010-11 to cut borrowing because ratings agencies and international investors were concerned about debt levels. Labour has argued that premature cuts could stifle a fragile recovery from the deepest recession since World War II.
Ratings agency Standard & Poor's said yesterday that the outlook on Britain's triple-A credit rating remained negative due to worries over the debt burden.
The Labour government last week gave details of how they would save £11 billion by 2013 by making departments more efficient.
However, business lobby group the British Chambers of Commerce called the curbing of the tax hike "an important step in the right direction".
"To secure the recovery, we must completely eliminate this damaging tax on jobs," BCC director general David Frost said in a statement.
The Conservatives said they had identified £12 billion of cuts that could be made in 2010-11 but would not implement them in full to protect spending on health and international development, and pending a full review of defence spending.