George Osborne declared the Conservatives were "winning the battle of ideas" in British politics as he tore into Alistair Darling for serving up a "desperate, cynical, stunt from a desperate and weak prime minister ".
Mr Osborne lambasted Gordon Brown for failing to call a general election and claimed that he was left "scrabbling around" to respond after the Conservatives proposed big cuts to inheritance tax and a new flat-rate charge for non-domiciled foreign business people living in Britain.
Focusing his fire on the Prime Minister, the shadow Chancellor declared: "I don't known why he even bothered to turn up. He should have called that election and let us deliver the Budget.
"We all know that this report was brought forward so it could be the starting gun for the campaign, until the Prime Minister took the pistol and fired it into his foot."
Vince Cable, the Liberal Democrat Treasury spokesman, warned that indicators on consumer debt and house prices were continuing to worsen.
"What is his assessment of the chance of a downturn in the economy? What is it? Is it 50 per cent or 20 per cent or 10 per cent? It's an important question. The factors that are precipitating a recession in the United States, which are personal debt and a bursting bubble in the housing market, are even more extreme in the United Kingdom."
But Mr Darling insisted the Government was maintaining long-term economic stability, and accused the Conservatives of leaving a black hole of up to £6bn in their tax and spending plans. He said Britain had one of the "strongest and most stable economies in the world" adding: "It is precisely that stability that will enable us to deal with the international uncertainty we now face."
Mr Darling told the shadow Chancellor: "How on earth can he maintain the stability when he has been making promises on inheritance tax and stamp duty on tax credits, when he has no means of delivering on those commitments?"
Mr Osborne mocked the Prime Minister for announcing reforms to inheritance tax, and the tax treatment of non-domiciled entrepreneurs only after his own plans had been outlined at the Conservative Party conference.
He told MPs: "He talks about setting out his vision for the country, but he has to wait for us to tell him what it is. It's not leadership of this country, it's followership. It's not strong, Prime Minister, it's weak.
"The public will see today's measures as a desperate, cynical, stunt from a desperate cynical prime minister. But the public can tell the difference between a Labour party that sees this all as a cynical calculating game, and a Conservative party that believes in lower taxes and aspiration".
He said: "This Prime Minister's name may appear on the cover of a book about courage, but it's never likely to appear in the index."
Mr Osborne added: "From this day on, let there be no doubt about who is winning the battle of ideas."
He accused Mr Darling of failing to prepare for a downturn in the economy and of failing to prepare Britain for the "new economic revolution", and said the rate of growth in spending on health and education would be cut by almost half.
He said: "The real charge against this Prime Minister is not that he got his growth forecasts for the next year wrong, although he did. Isn't the real charge against this Prime Minister that, first, he should have prepared the public finances for a slowdown in the economy and he didn't? Second, he should have prepared the public services for a slowdown in spending, but he hasn't done that either."
Mr Darling replied: "If the Opposition make promises they cannot afford, that will lead to instability, increased borrowing, taxation rising elsewhere, or cuts in health and education. It was precisely that instability that got the Conservatives into so much trouble when they were last in government. The choice is between an affordable tax cut or irresponsible, unaffordable promises being made by the Conservative Party."
Mr Cable based his attack on his repeated warnings of problems with consumer debt and the housing market. He told Mr Darling: "Let I just put to him a question I put to his predecessor four years ago in which I asked him isn't the brutal truth that the British economy is sustained by consumer spending, pulled against record levels of personal debt which is secured, if at all, against house prices which the Bank of England described as well above equilibrium levels. In those four years, each one of those four indicators has deteriorated. Can he not bring himself to accept that there are millions of families being squeezed by a combination of reduced disposable income and higher interest rates as a result of moving from fixed interest rates? Does he not accept that there is a major vulnerability to the British economy that has major implications for his spending review?"
Mr Cable said the 4 per cent increase in health spending was the "absolute minimum" required to maintain improvements in patient care.
He also warned that council tax was due to rise by 5 per cent a year and would hit low-income households and pensioners.
Mr Darling told MPs: "[Mr Cable], like the Conservatives, overlooks the fact that over the last few years we have established a very strong and stable economy, one which will enable us to withstand the uncertainty we face today."
He added: "Having looked at the Liberals' proposals on tax, which cost around £18bn a year, it's not at all clear to me where they would get the money from, even to finance a small part of the money we think is necessary on public services."
John McFall, the Labour chairman of the Commons Treasury Select Committee said: "Can he give me a guarantee that any tax initiatives that he has announced have been costed and they can be funded in the long term – otherwise the chickens will come home to roost sooner than people expect."
Kenneth Clarke, the former Conservative chancellor, also pointed to high debt levels and called for new fiscal rules.
He said: "The Chancellor has acknowledged that we are going to have a very sharp slowdown in the economy and the end of a period when a sea of debt – government and household debt – has sustained growth so far."