Ah, the tories are in conference and they want...

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<div id="article-wrapper"> George Osborne speaks at the Conservative conference. Photograph: Jon Super/AP

The Conservatives today took their biggest political gamble in a generation when the shadow chancellor, George Osborne, urged the nation to respect his honesty by setting out a painful, if carefully pitched, package of spending cuts.

Osborne finally showed his hand after months of criticism that the Tories are short on policy detail as he unveiled plans including a one-year pay freeze for 5 million public sector workers, deferral of the state pension by a year, and slashing back tax credits for the middle class.

In a speech that may come to decide the outcome of the general election, he repeatedly deployed David Cameron's leadership election slogan – "we are all in this together" – to ask the nation to make a collective sacrifice in which everyone but the poorest would have to contribute to reduce "the largest deficit in our modern history".

Claiming Britain was entering a new era in politics in which there will be a premium on candour, Osborne told the Tory conference in Manchester: "These are the honest choices in the world in which we live. Anyone who tells you these choices can be avoided is not telling the truth.

"After a year in which trust in parliament has been rocked to the foundations, we know that politics must change forever. We have to be open and transparent with the people we serve."

The measures announced today represent a spending cut of more than £23bn over a parliament. But Robert Chote, the director of the Institute of Fiscal Studies, said the cuts amounted to just a "dent" in the challenge to more than halve the deficit by 2014. The proposals would only take Osborne a sixth of the way to meeting his goal, he said.

The Tories said they had been more specific about the coming pain than any political party since Labour had proposed tax rises ahead of the 1992 election. Some savings, such as greater efficiency in the public sector, would reap billions, they claimed, but could not be quantified this side of an election.

Osborne's promised pay freeze elicited a furious response from the unions. "Millions of public sector workers will be left out in the cold," said Dave Prentis, leader of Unison. "Other staff will have to pay with job and service cuts while bankers and tax cheats escape with a slapped wrist."

In the headline measures announced today Osborne proposed:

• A public sector pay freeze for 5 million public sector workers in 2011, excluding frontline military and 1 million public servants earning less than £18,000.

• £3bn-a-year cuts in Whitehall bureaucracy, including a £50,000 annual cap on new public sector pension payouts and cutting regulators and inspectorates.

• A requirement that any public sector salary, including those in the BBC, worth more than the prime minister's £198,000 will be put to the Treasury for the chancellor's personal approval.

• Abolition of child trust funds for all but the poorest third of families and disabled children.

• Withdrawal of tax credits for households with incomes earning over £50,000 by means-testing the family element of the child tax credit.

• Putting back the state pension age to 66 for men in 2016 and for women in 2020.

Accused by some of not showing the maturity required for the job, Osborne was bold enough to risk alienating the party's rightwing by insisting: "We could not even think of abolishing the 50% tax rate on the rich while at the same time I am asking public sector workers to accept a pay freeze to protect their jobs."

Explaining his decision to exempt public sector workers earning less than £18,000 from a freeze in 2011, he said: "I don't believe in balancing the budget on the backs of the poorest." The freeze, he claimed, would save 100,000 jobs.

Osborne said he reserved the right to use the tax system to hit bankers if they used state subsidies to prop up their bonuses rather than strengthening their balance sheets. "I believe in the free market, not a free ride," he said.

But the Tories privately acknowledge that even a carefully-targeted pay freeze risks alienating millions of teachers and nurses, angry that they are making sacrifices owing to the mistakes of bankers. Osborne hopes that the deferral of the pain until a year after the election will save him from a political backlash.

Labour has so far recoiled from a total freeze from 2011, instead announcing that the pay of 750,000 public sector workers will be frozen to 1% or less next year.

Liam Byrne, chief secretary to the Treasury, said: "He lost his nerve. It was far from clear that this speech even pays for itself, let alone matches our pledge to halve the deficit in four years."

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However, is austerity what the British public