Michael Howard has warned that tax rises and over-regulation is crippling British business.

Addressing the CBI the Tory leader said red-tape was proving to be a major problem for business.

And he warned that the government was "locked in a vicious circle of ever higher taxes and ever failing public services".

"The biggest concern is not current growth rates or even the prospects for next year. It is the fact that our medium and long-term prospects are being systematically undermined as a result of burdens being loaded on to companies by this government," he said.

"The supply side reforms of the 1980s, in which burdens on business were reduced, took many years to feed through.

"But over the last six and a half years they have been eroded, and in many cases reversed. This has been done by the very chancellor who now lectures the rest of Europe on the need for a competitive economy."

The Tory leader went on to attack Labour's approach to tax and spending. "Why, after 60 tax rises, and a 50 per cent increase in the tax take, are we faced with the prospect of yet further tax rises under Labour in the future? The problem is Labour's approach to the public services," he said.

"Because the government refuses to introduce reform to our public services, its only answer is higher tax. When that fails, it can only turn to higher taxes still.

"It keeps coming back to the taxpayer for more and more money in an increasingly desperate attempt to deliver results. It is locked in a vicious circle of ever higher taxes and ever failing public services."

Howard also defended his decision to remodel the Tory frontbench - signalling it would increase the likelihood of defeating Labour at the next election.

"My approach to politics is to be straightforward and businesslike. That's how you run your companies and your outfits. That's how I intend to run mine," he said.

"That's why I've shrunk my Shadow Cabinet from 26 to 12. Our objective is different from that of the government. Our objective is singular and simple. It is to win the next general election. The structure I've put in place is designed to achieve that objective."

And he said there would be no blank cheques from his party in the run up to the next election.

"By reforming the public services and by tackling waste we can halt the need for ever higher taxes," he said.

"But we won't be making any promises we can't deliver. All our proposals will be clear, costed and credible."

Howard remained upbeat about the Tories' prospects despite no change in the opinion polls. "There is a mood change sweeping across our country - in companies, in our public services, among the public as a whole," he said.

"Labour's approach just isn't working. All Labour offer is second best. But the people in this country are not prepared to settle for second best."