Cameron admits possible tax hikes

The Conservative leader insisted he "hoped" short-term hikes would not be necessary to balance the books if his party won the next general election.

But he added: "Government always has to do what is right to safeguard the public finances."

The warning came as Mr Cameron set out an "economic recovery plan" to help deal with the fallout from the credit crunch and safeguard thousands of jobs.

He called for the introduction of US-style bankruptcy proceedings - where struggling firms are given court protection while they try to hammer out a deal with creditors.

Delivering a speech to business leaders in London, Mr Cameron also insisted that the Government should ease the pressure on consumers by cutting stamp duty, scrapping plans for raising road tax on older cars, and introducing a "fair fuel stabiliser" - which would cut duty as oil prices rise, and increase it as prices fall.

The taxpayer could not "take any more pain" and "needed relief", he said.

He said a Tory Government would "share the proceeds of growth" over the long term to make room for tax cuts.

However, interviewed on BBC Radio 4's Today programme, Mr Cameron risked the wrath of his party's right flank by refusing to rule out short-term tax rises to bolster Treasury finances.

"I hope that won't be the case, because I think we do have more responsible spending plans," he replied.