Iain Duncan Smith has mounted a robust defence of his leadership with an attack on the government's handling of the fire strike and a commitment to keep the pound.

In a speech to the Institute of Directors trailed as "blunt rather than quiet", Duncan Smith defended his style of leadership."Whether you agree with me or not, you know exactly where I stand," he said.

"Any future Conservative government will need you to generate the national wealth to deliver the public services we all want to see.

"In return, you will expect us to deliver a better environment for business."

Addressing business leaders in London, he said that the government's public service reform agenda is "fundamentally wrong".

"Labour are pouring vast amounts of money into old, unreformed public services in the hope that things will get better," Duncan Smith said.

"If we are going to reach the standards enjoyed by our nearest European neighbours, there needs to be a fundamental change in the way we run our schools, hospitals and transport."

And he warned that "failing public services will lead to a failing economy".

Conservatives will "break the link between state finance and state provision" and reject any moves to scrap the pound, he pledged.

"We will not waste our time playing games with the euro - because the entire project reflects the priorities of politicians and not people," the Tory leader told his audience.

"It simply detracts from the real problems facing the country. We must not give away the most powerful tool we have for delivering a stable economy: the ability to set our own interest rates to suit the needs of our own country."

Attacking the government's handling of the fire strike, the Tory leader warned that Tony Blair "needs to make absolutely clear that he will not put the sanctity of a picket line before public safety".

"The prime minister also said that to give the military access to this fire fighting equipment would inflame the situation with the FBU," he said.

"Well the situation is now inflamed, the FBU are on strike and the British public are being denied protection from the best fire fighting equipment available. Equipment that they have paid for.

"He must give the fire fighting equipment to the military and give them the training to use it, and he must do so now."

And he will warn that the government may be forced to increase taxes as a result of the economic impact of red-tape.

"Strong businesses at the heart of a strong economy generate the wealth which pays for strong public services," Duncan Smith claimed.

"This government is committed to huge increases in public sector spending over the next few years.

"To meet their commitments they are totally reliant upon a buoyant economy and a thriving business sector.

"Yet their heavy-handed approach to regulation has placed a crushing burden on British business.

"This chancellor's policies are striking at the heart of our enterprise economy."

Duncan Smith also hit out at Gordon Brown's "target-setting culture".

"Rather than offering better value for money, these targets have created a culture of deceit around the true performance of our public services," he said.

"If a target is missed, the government now simply rolls it over, waters it down, or scraps it."

He will tell his audience that "we must give public service professionals the responsibility and the freedom to achieve results".

"Until we do this, we will never see the improvements in our public services that this country needs and deserves," he added.

"Gordon Brown thinks otherwise. His answer is to spend a massive amount of money on unreformed public services - raising spending by over 20 per cent over the next three years alone.

"Well, we simply cannot keep spending faster than the country earns. The sclerosis in our public services is spreading, as the arteries of the country are clogged by the cholesterol of tax and borrowing.

"If Doctor Brown carries on with this treatment, we are heading for an Economic Coronary."