The Conservatives must take on and defeat Labour “dinosaurs” in a great “clash of ideas” over the future of capitalism, Philip Hammond has said.
He told activists they must expose Jeremy Corbyn’s “back to the future socialist fantasy” which he said was leading people “down a dangerous path”.
The chancellor also said his party must address concerns over pressure on living standards and housing costs.
And he announced £300m for rail improvements in the north of England.
The new money will be used to ensure HS2 will link to faster trains between Liverpool and Manchester, Sheffield, Leeds and York – so-called Northern Powerhouse rail.
The chancellor used his keynote party conference speech in Manchester to mount a defence of free market economics, which he claimed was coming under assault from Jeremy Corbyn.
Describing the Labour leader and his shadow chancellor John McDonnell as “dinosaurs who had broken out of their glass cases”, he said Labour’s harking back to the “ideological experiments” of the 1970s presented a “clear and present” danger to the UK’s future prosperity.
“They say politics is about the clash of ideas. So we say to Corbyn ‘bring it on’,” he said.
“Let them put their arguments, let them make their case. We will take them on. And we will defeat them. I promise you this: we will defeat them by the power of argument; by our logic; by the experience of history.”
Mr Hammond insisted the British economy was “fundamentally strong”, with employment at a record high and income inequality at its lowest level for decades.
But he said the UK faced a number of short-term and long-term challenges, including Brexit-related uncertainty, improving output and sharing the fruits of enterprise and wealth more widely.
“And while no-one suggests a market economy is perfect, it is the best system yet designed for making people steadily better off over time and underpinning strong and sustainable public services for everyone.
“As this model comes under renewed assault, we must not be afraid to defend it.”
The BBC’s political correspondent Chris Mason said Mr Hammond’s speech offered a glimpse into an internal Conservative debate about how to take on Mr Corbyn, with some wanting to tack a little left but others saying they should stick to a full-throated defence of the free, albeit regulated, market.
The Conservatives kicked off their week in Manchester by announcing plans to freeze student fees and pledge an extra £10bn for the Help to Buy scheme as part of an effort to win over younger voters.
Mr Hammond said the Conservatives must demonstrate that they are “the party of progress” which is ready to embrace the future rather than hark back to the “ideological experiments” of the 1970s.
“The party that makes a clear commitment to the next generation – that they will be better off than us; and that their children will be better off again than them.”
The chancellor said cities in the East Midlands, such as Leicester, would also benefit from the new cash set aside for rail modernisation in the north.
The Northern Powerhouse rail scheme is being drawn up by local authorities and business leaders to create connections between HS2 and cities not directly on its route. It is likely to rely on “bi-mode” trains that can run on diesel and electric power.
“This investment will go towards ensuring HS2 infrastructure can link up with future Northern Powerhouse and Midlands rail projects – helping the towns and cities of the North reach their full potential,” he said.
On the second day of the conference, Work and Pensions Secretary David Gauke announced new guidance to job centres for giving cash advances to benefit claimants.
The government has been under pressure to pause the national roll-out of Universal Credit amid mounting concern families forced to wait six weeks for their first payment will be left destitute and homeless.
Mr Gauke said he wanted to help affected families but would not halt the programme, despite pressure from 12 Tory MPs, a former government adviser and Labour.