Tories say no more tax hikes to cut debt

LONDON (Reuters) - The Conservatives said on Monday they do not intend to raise taxes beyond current Labour government plans to tackle a record budget deficit because spending cuts will do most of the work.

Conservative shadow chancellor George Osborne, likely to take over the reins if the Conservatives win an election expected on May 6, has said he wants to cut the deficit faster than Labour's plans to halve it over four years.

The Conservatives have already pledged to reverse part of a planned increase in payroll tax next year but argue that because their deficit reduction plans place a greater emphasis on spending cuts, taxation plans beyond that should be sufficient.

Osborne would not rule out future tax rises entirely but said a rise in VAT sales tax, in particular, was not planned.

"The plans we set out involve around 80 percent of the work being done by spending restraint and 20 percent from tax increases -- the tax increases are already in place," he told BBC radio.

Britain's budget deficit has soared close to 12 percent of gross domestic product this year, ringing alarm bells in financial markets and raising fears that the country's top grade credit rating could be at risk without tough action.

Opinion polls have suggested the election could produce a hung parliament, where no one party has overall control.

That would be the worst case scenario for markets because it could result in disagreement among the parties over the best way to cut Britain's government borrowing, currently comparable to crisis-hit Greece.

"The priority is to sustain the recovery and the way you sustain the recovery is to make a start dealing with deficit," Osborne said.

The Conservatives say they will cut public spending by about six billion pounds this year, while Labour is holding off cuts until 2011, arguing that the fragile economy needs all the help it can get until recovery is assured.

(Reporting by Matt Falloon; editing by Patrick Graham)