Osborne hits out at City in key speech

TORY shadow chancellor George Osborne yesterday said the City&rsquo;s focus on &ldquo;illusory&rdquo; short-term gains had damaged the financial sector and the entire economy.<br /><br />Speaking at the Association of British Insurers (ABI) conference, Osborne said that City regulation needed to be reformed to &ldquo;reduce the risks the financial sector poses to the rest of the economy&rdquo;. <br /><br />Osborne, who is likely to become chancellor next year after Labour&rsquo;s drubbing in the polls, also warned City banks against paying out &ldquo;huge bonuses&rdquo; on the back of gains aided by taxpayer-backed bonuses. <br /><br />He made the comments as he outlined a New British Economic Model, focused on cutting fiscal debt and building a domestic capital base rather than relying on cheap borrowing from Asia. <br /><br />The plans include huge infrastructure spending, investment in skills and new technologies to boost manufacturing, a high-speed rail network and a &ldquo;smart electricity grid&rdquo;.<br /><br />Osborne also said that, if elected, the Tories would abolish compulsory annuitisation at 75, although he warned that abolition would be dependent on having sufficient income in retirement to avoid means-tested benefits.<br /><br />He added that that the Tories would &ldquo;resolve the Equitable Life debacle in a way that is fair to policyholders and restores broader conference in the industry&rdquo;.<br /><br />And he repeated plans to raise the inheritance tax threshold to &pound;1m and to scrap the basic rate of tax on savings income. <br /><br />But Labour chief secretary to the Treasury Liam Byrne said: &ldquo;George Osborne&rsquo;s priority is an unfunded tax giveaway of &pound;200,000 to the 3000 richest estates. He presents it as a New Economic Model, but it is a recipe for the same old Tory Economic Mess.&rdquo;