Lord Mandelson has accused the Tories of planning post-election rises in VAT to pay for what he claims are £22 billion worth of unfunded promises.
The emergency Budget promised by shadow chancellor George Osborne within 50 days of a Conservative victory would lead to lost jobs, falling living standards and "butchered" public services, the Business Secretary claimed.
His intervention came after 23 business leaders endorsed Tory plans to reverse the bulk of the Government's planned rise in National Insurance, saying it "would protect jobs and support the recovery".
David Cameron said that winning the support of businessmen like Sir Stuart Rose of Marks & Spencer and Sir Stelios Haji-Ioannou of easyGroup, who were among the signatories of a joint letter to the Daily Telegraph, was "a very important moment in the election campaign".
But Lord Mandelson said it would be impossible for Tories to fulfil pledges on tax and spending without "deep cuts" to schools, the NHS and policing or higher taxes elsewhere.
The row over tax and spending comes as the divide between the leading parties' fiscal plans deepens, with the Conservatives promising to avoid next year's 1p rise in National Insurance for workers earning less than £45,000 by cutting Government waste.
