Tories pledge £2,500 ‘carrot’ to give work to the jobless

The Tory leader predicted that 350,000 jobs could be created next year if the Government adopted his "Keep Britain Working" plan to give firms a National Insurance holiday for every extra worker
they hire.

But a leading business chief warned that the plan would do nothing to help small business survive the downturn and said few firms wanted to recruit.

The Prime Minister claimed the proposals were "unfunded" and "not a serious" response to the wider need to kickstart the economy with direct help for families.

Unveiling his proposals today, Mr Cameron moved to distance himself from the Tories' association with mass unemployment of the Eighties and Nineties, rejecting for the first time Norman Lamont's infamous claim that "unemployment is a price worth paying" to keep inflation down.

He also signalled for the first time that he may dump his party's commitment to match Labour spending plans to 2011.

The Tory tax cut, worth up to £2,500 for every worker taken on, would only apply to those who had been unemployed for more than three months.

It would be "revenue neutral", paid for by predicted savings in unemployment benefits.

The battle over tax cuts began in earnest amid renewed reports that Chancellor Alistair Darling is set to suspend plans to increase car tax. As revealed by the Standard in September, the Treasury is expected to use this month's pre-Budget report to delay retrospective moves to raise vehicle excise duty.

Mr Cameron said his proposals were based on a "very, very clear principle" that a government can only cut taxes if it can show to the public how they will be funded without massive borrowing.

He admitted that former Tory chancellors, including Norman Lamont, were advising him. But when asked if he agreed with Mr Lamont's remark on unemployment, he replied: "It is certainly something I have never said, nor would I say."

Earlier, the Tory leader hinted he may drop his pledge to stick to Labour plans. He told BBC Breakfast: "Our approach has been to say that we will stick to their spending plans, but I have to say their spending plans seem to be completely up for grabs. They are in complete flux, complete
confusion."

Gordon Brown dismissed the Tory plans, saying: "This is not a funded tax cut at all The money is not there to pay for what is being proposed. It is not serious in measuring up to the problems we face."

David Frost, of the British Chambers of Commerce, said: "Companies are not in a position to think about recruiting new staff right now. Businesses are shedding staff."

Liberal Democrat leader Nick Clegg, who is proposing a 4p income tax cut, said: "These proposals are nothing more than schoolboy economics."