ECONOMISTS yesterday welcomed Tory plans to cut public spending by &pound;23bn over the next parliament, but warned that the party would need to make much deeper cuts to plug the massive budget deficit. <br /><br />Speaking at the Tory party conference in Manchester, shadow chancellor George Osborne set out plans to shave &pound;7bn a year from existing spending commitments. He proposed:<br /><br />&bull; A pay freeze for over 4m public sector workers in 2011-2012, which the Tories say will save &pound;3.2bn assuming that wages would have increased by 2.4 per cent. Those earning less than &pound;18,000 a year will be exempt, as will armed forces serving overseas. <br /><br />&bull; Saving &pound;3bn a year over the course of the next parliament by cutting the cost of Whitehall bureaucracy.<br /><br />&bull; Stopping tax credits for those on incomes over &pound;50,000, a move that Osborne said would save &pound;400m a year or &pound;2bn over the entire parliament. <br /><br />&bull; Cutting benefits by &pound;25-a-week for anyone on incapacity benefit who is deemed fit-to-work in a new medical test, saving &pound;1bn over five years, although &pound;600,000 of this will be spent on new back-to-work schemes.<br /><br />&bull; Saving &pound;1.5bn in the next parliament by not contributing to the Child Trust Funds of better-off families. <br /><br />&bull; Raising the retirement age from 65 to 66 from 2016 for men and 2020 for women, which the Tories said would save &pound;13bn a year once implemented. <br /><br />Osborne also mentioned the possibility of reversing Gordon Brown&rsquo;s tax on pension funds, although this would be an expensive move, costing well in excess of &pound;5bn a year. <br /><br />But he said that the 50p tax rate would stay in force for the time being. &ldquo;We could not even think of abolishing the 50p rate on the rich&hellip; while asking many of our public sector workers to accept a pay freeze.&rdquo;<br /><br />And he hinted that a Tory government could introduce a windfall tax on bonuses if banks increase remuneration instead of using profits to increase their capital levels. <br /><br />Gemma Tetlow, senior research economist at the Institute of Fiscal Studies, welcomed the plans to cut spending but said Osborne would need to be more radical.<br /><br />She added: &ldquo;The savings are not sufficient on their own to bring the reduction in borrowing that the Conservatives have signed up to.&rdquo;<br /><br />She also said Osborne was being over-optimistic in saying he could save &pound;13bn by raising the retirement age.<br /><br />And Jonathan Loynes of Capital Economics said: &ldquo;This is small fry compared to the government&rsquo;s forecast that borrowing will still be close to &pound;100bn per annum at the end of the next parliament. <br /><br />&ldquo;Much deeper spending cuts, probably involving huge cuts in public sector employment, will be needed.<br /><br />&ldquo;Markets, credit rating agencies and investors will be looking to see borrowing come down more quickly.&rdquo;