GEORGE OSBORNE declared “open class warfare” yesterday by revealing plans to permanently peg government spending “at Victorian levels.”

The Chancellor announced his intention to effectively ban public-sector borrowing at his annual Mansion House speech in the City of London.

Bedecked in black tie dress, Ms Osborne told bosses enjoying a lavish banquet that Britain should pull its belt in “while the sun is shining.”

He told them: “In normal times, governments of the left as well as the right should run a budget surplus to bear down on debt and prepare for an uncertain future.”

The Chancellor said he would “entrench” the ban by bringing in a Bill later this year to make it law.

The requirement to run a surplus at all times would then be overseen by the Office for Budget Responsibility, he added.

Mr Osborne hopes that would normalise his move.

But top economist Richard Murphy spelled out the Chancellor’s real motives, saying it was part of the Tory’s plan to shrink the state to pre-welfare state levels.

“He is taking us back to the thinking of the pre-war era, when there was no social safety net, there was no NHS, pensions were limited, education ended at 14, economic wellbeing depended upon the vagaries of the market,” Mr Murphy explained on his blog.

“This is not just an economic policy that George Osborne is proposing, it is the re-establishment of an old world order where the rights of those with wealth are to be entrenched by the refusal of the state to intervene in ways that might challenge them ever again.”

And he added: “To put it another way, George Osborne has announced open class warfare.”

Mr Osborne is expected to make the compulsory surplus part of the first all-Tory budget for two decades when he delivers it on July 8.

This year he was greeted by protesters dressed as himself and City bankers in support of the Robin Hood tax campaign.

The campaign, backed by a coalition of 119 charities, calls for a tiny tax on financial transactions to provide vital investment in public services and ending child poverty.

Mr Osborne’s economic competency was called into question again after last night announcing a “fire sale” of the government’s 80 per cent share in RBS bank.

The bank was bailed out by taxpayers during the 2008 capitalist crisis but the New Economics Foundation has warned the sale of cut price shares will cost the public purse £13bn.

Unite national finance officer Rob McGregor said: “Like Royal Mail and British Gas before it, the Tories are ripping off the public by selling our stake in RBS at a knock down rate to City investors.”

He also plans to hold a Commons vote on the issue later this year.

In January, Labour’s front bench controversially backed the Tory’s budget charter, which included plans for £30 billion of spending cuts.

Mr Osborne hopes to force them into supporting his latest stunt by painting the opposition as profligate with public finances. Labour shadow chancellor Chris Leslie said the Chancellor’s speech was a “distraction technique” from growth figures, which have slumped for four quarters running.

Mr Leslie did not rule out supporting the surplus, but called for a “balanced approach” to reducing the deficit. He said: “We need to deal with the deficit and no-one would disagree with a surplus when economic circumstances allow or that investment is needed if the economy is in a downturn.”

The Chancellor was famously presented with an “Economics for Dummies” handbook by two comedians when he arrived to deliver his 2012 Mansion House speech.

This year he was greeted by protesters dressed as himself and City bankers in support of the Robin Hood tax campaign.

The campaign, backed by a coalition of 119 charities, calls for a tiny tax on financial transactions to provide vital investment in public services and ending child poverty.

Mr Osborne’s economic competency was called into question again after last night announcing a “fire sale” of the government’s 80 per cent share in RBS bank. The bank was bailed out by taxpayers during the 2008 capitalist crisis but the New Economics Foundation has warned the sale of cut price shares will cost the public purse £13bn.

Unite national finance officer Rob McGregor said: “Like Royal Mail and British Gas before it, the Tories are ripping off the public by selling our stake in RBS at a knock down rate to City investors.”