Britain is paying more in tax but moving backwards, Iain Duncan Smith has said.

Vowing to fight on a tax-cutting agenda, he said on Friday that Labour was failing business and running down public services.

Speaking in Leeds, the Tory leader said the "quality of our lives is simply not as good as it used to be".

"We had some of the world's finest universities, which educated our best and our brightest to an excellent, indeed incomparable, standard," he said."Our police made sure our homes were secure and our streets were safe."And we had justice and welfare systems, which, aside from their innately British generosity, nonetheless presumed that - in the main - individuals should accept and assume responsibility for their own behaviour and progress."

He warned that too many people had become used to "making do" under Labour.

In a clear signal that the Tories will fight the next election on tax, Duncan Smith said: "I fear we are reaching the point at which its taxation policies are beginning to undermine the very fabric of our enterprise economy."

He said the Conservatives were a "party of lower tax".

"It is a natural consequence of our belief in smaller government, greater individual liberty, and greater personal responsibility," said the Tory leader."As for how governments spend your money, we think the measure of success is not how much they spend, but how well - and how carefully - they spend it."We also believe that low-tax economies are more efficient, and more competitive, than high-tax economies."

Duncan Smith said modern Tory politics were rooted in a "single belief": "That people live better lives when they have the freedom to run their own lives, when they take responsibility for doing so, and when they make their own choices."

And he dismissed the "sterile debate" which says "you can either be pro-public services or pro-business, but you can't be both".

"We want life in Britain to be better. As the fourth largest economy in the world, we should have public services that are world-class, not failing. We should not be lagging behind our neighbours," he concluded.