The Tories have commissioned Grant Thornton to conduct a major review of the income tax, national insurance and VAT systems.

Shadow chancellor George Osborne said this week that the aim would be to reduce the administrative burden on small businesses.

In a major speech to a London conference on flexible working organised by the Chartered Institute for Personnel and Development and the British Chambers of Commerce, he said: 'I’d like to propose a new pact with Britain’s small businesses.

'In return for them encouraging more flexible working and greater social responsibility, the Conservative Party will reduce the burdens that small businesses face. I am today setting out the radical package of tax simplification that will form the basis of this new relationship between government and small businesses.

'First, I can announce that we are commissioning Grant Thornton, one of Britain’s leading accountancy firms, to look at how we can greatly simplify the administration of income tax and national insurance.

'At the moment, income tax and national insurance are levied in different ways and over different periods – and require two entirely different systems of administration. Issues like this are causing needless complexity and administrative difficulties, and have been the bain of small businesses for decades.

'Grant Thornton will be developing implementable proposals on how we can align the basis of charge for employee national insurance contributions and income tax.

The Tories are also looking to reverse the increase in the tax rate for small businesses and at ways of simplifying the VAT system, Osborne said.

With Gordon Brown set to take over as prime minister from Tony Blair on June
27 and appoint trade secretary Alistair Darling as his first chancellor, Osborne's speech is a bid to undermine the government's economic record.

Brown's Treasury deputy Stephen Timms said: 'The Tories have announced they are employing accountant Grant Thornton. These are the same accountants who earlier this year found an £8.3bn black hole in the Tory tax and spend plans.

'David Cameron and George Osborne are now promising the Tory right a wish list of tax cuts - without any idea how to fund them. If they ever got the chance to implement these uncosted, up-front tax pledges, the result would be a return to boom and bust in our economy.'