The Conservative leadership sidestepped what it saw as an attempt by Labour to portray it as the friend of the wealthy by refusing to oppose the tax rises on people earning over £100,000.

Drawing the battle lines for the general election, it instead concentrated its fire on the soaring level of borrowing and debt and what it claimed was a tax raid on the middle classes.

The Tory leadership saw the timing of the tax and spending announcements as a move by Labour to box it in as the election approaches. But when asked whether it would reverse the tax rises on the top earners, it insisted it would not fall into “Gordon Brown’s trap” and that its priority was relieving the burden on lower income families.

Privately it accepts that the next 18 months will be dominated by a trial of strength between the parties over who can claim to be the party of fairness at a time of struggle. Opposing the “fiscal stimulus” is perhaps David Cameron’s biggest gamble, given that Britain’s action will be followed by other countries over the next days and weeks. But to win the next election he believes that he has to show that Mr Brown left Britain far worse prepared for the downturn than other countries, as demonstrated by George Osborne, the Shadow Chancellor, in his immediate response to Mr Darling.

Darling's £1 trillion debt gamble

Alistair Darling stored up big tax rises for the better-paid and huge public spending curbs in his fight against recession. Watch video

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He suggested that Britain would be pushed to the “verge of bankruptcy” with temporary tax cuts giving way to larger tax rises after the next election.

Responding to the Pre-Budget Report, MPs from all parties staged a dry run of their respective election scripts, with Labour shouts of “Tory cuts” met by Conservative chants of “tax bombshell” across the Commons floor. The Liberal Democrats said that tax cuts should have been targeted at the less well-off.

The exchanges revealed that ideological and policy differences between Conservatives and Labour are now greater than at any time since David Cameron became leader in 2005.

Mr Osborne told the Commons: “The choice at the next election could not be clearer – a record borrowing binge and a lifetime of tax rises under Labour or fiscal sanity and lower taxes that last under the Conservatives.”

Mr Darling responded: “You were also right to say we have chosen to take a different path. We have taken a path that will help businesses, it will help pensioners, it will ensure that everyone is helped through a reduction in VAT.”

Both hitched their fortunes to the length and depth of recession, with the Shadow Chancellor questioning Mr Darling’s forecast that the recession would last one year, calling the prediction optimistic.

The Conservatives will argue that Britain is worse placed than other leading economies because of Mr Brown’s borrowing binge. “This isn’t just a bombshell, it is a precision-guided missile at the heart of a recovery,” Mr Osborne said.

The Conservatives dismissed the Chancellor’s pre-Budget package, calling the 13-month VAT reduction costly for business and of little practical help.

The Shadow Chancellor instead focused on the increase in borrowing to pay for the £16 billion fiscal stimulus, calling it a “huge unexploded tax bombshell timed to go off underneath the future economic recovery”.

Tory strategists said that Mr Darling handed them a gift by admitting that the national debt will reach £1 trillion, the highest on record and higher than under the chancellorship of Norman Lamont.

To roars of approval from the Tory benches, the Shadow Chancellor savaged “tax giveaways for Christmas paid by tax rises for life” which he said would hit Middle Britain worst.

“What it means is that he is giving £20 billion in giveaways and taking back £40 billion in higher taxes. The major rise in national insurance – a tax on the jobs and incomes of Middle Britain.

“It is confirmation of the time-old truth – that in the end all Labour chancellors run out of money and all Labour governments bring this country to the verge of bankruptcy.”

The timing of the tax rises – which will not come in until 2011 – was no coincidence, Mr Osborne said.

“I wonder why he chose those dates. This Budget is all about the political cycle and not the economic.”

The Conservatives have consistently opposed additional borrowing to pay for a fiscal stimulus to revive the economy. Last week Mr Cameron decoupled his party from Labour’s spending pledges in 2010-11, paving the way for tax and spending cuts.

Mr Osborne signalled that the Conservatives would oppose the 13-month reduction in VAT. “We will see if it has the great economic effect the Prime Minister expects,” he said. “He didn’t tell us that today the German and French governments have ruled out a similar move this lunchtime.

“He didn’t tell us that today many retailers are already questioning the cost of implementing it and the impact it will have on the high street when many shops are already selling things at 20 per cent or 30 per cent off.”

Mr Osborne and Vince Cable, his Liberal Democrat counterpart, took aim at Mr Darling’s projection that the recession would last no more than a year, which they agreed were vastly more optimistic than independent forecasts.

Mr Osborne said that the alternative to a stimulus funded by borrowing was “radical monetary action and responsible fiscal policy” – low interest rates, measures to ensure banks continue lending and reduced government spending.

Mr Cable suggested that the £12.4 billion spent on VAT reduction would be better spent on the least well-off. “What I fail to see is how the economy gets a major stimulus from a £5 cut in a £220 imported flat screen television or a 50p cut in a £25 restaurant bill.”

Kenneth Clarke warned the Chancellor that he should be certain that the fiscal stimulus was affordable in the current climate. “When you look ahead and start saying that even on your optimistic forecast, we will be borrowing £115 million next year . . . you run the risk of having the foreign exchange markets and the securities markets refusing to believe that this is credible and repayable,” he said.

Where the parties differ

The economy Disagreement whether Labour’s tax cuts and spending surge have helped to ease the recession

Public spending The Tories are no longer committed to matching Labour on spending. Labour will accuse Tories of “cuts”, while Tories will attack Labour waste

Borrowing The Tories oppose any fiscal stimulus funded by borrowing, saying that Labour is storing up tax rises for after the next election

Tax increases for the wealthy Labour have introduced a new 45p rate for after the next election. While the Tories say that reversing it is not their top priority, this issue is likely to be divisive at the next election

Tax increases on the middle class Labour will say that top-earners will pay for three quarters of the package. The Tories will make the charge that the middle classes, including nurses and police, will pay more

Inheritance tax Labour will attack the Conservatives’ policy to allow couples with estates worth up to £2 million to be handed down tax-free. They will claim that it costs £1 billion to help 3,000 estates

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