Rishi Sunak has told Tory activists that he would only consider cutting taxes once the public finances are on a “sustainable footing” following the coronavirus crisis.

The Chancellor, who has faced criticism from Tory allies and political opponents over the scale of the tax burden, said it would be “immoral” to borrow more as he defended his approach.

But he also used his Conservative conference speech to paint an optimistic picture about the country’s future, promising to put the UK at the forefront of the artificial intelligence revolution with new scholarships and research placements.

On the eve of his conference speech, Mr Sunak was warned by Commons Leader Jacob Rees-Mogg – a darling of the Tory right – that taxation has hit “the limit”.

But Mr Sunak has refused to rule out further hikes and, addressing a packed conference hall in Manchester with Boris Johnson in the audience, defended his approach.

“Our recovery comes with a cost,” he said.

“Our national debt is almost 100% of GDP (gross domestic product – a measure of the size of the economy).

“So we need to fix our public finances.”

Mr Sunak acknowledged that tax rises are “unpopular,  some will even say un-Conservative”.

But he added: “I’ll tell you what is un-Conservative: unfunded pledges, reckless borrowing and soaring debt.”

The Chancellor continued: “Yes, I want tax cuts. But in order to do that our public finances must be put back on a sustainable footing.”

Mr Sunak said Brexit – “despite the challenges” – meant that in the long term the UK would have “agility, flexibility and freedom” and help create “a renewed culture of enterprise”.

Conservative Party Conference
Prime Minister Boris Johnson applauds as Chancellor Rishi Sunak speaks at the Conservative Party conference in Manchester (Peter Byrne/PA)

In a passing reference to the current crisis facing the Government, he said: “Right now we are facing challenges to supply chains, not just here but right around the world and we are determined to tackle them head on.”

Mr Sunak added that “tackling the cost of living isn’t just a political soundbite, it’s one of the central missions of this Conservative Government”.

Rising energy bills, an imminent cut to Universal Credit and next year’s national insurance increase will add to pressure on household finances.

The Chancellor announced new measures to help ensure the UK remains “a global leader” in artificial intelligence (AI), claiming it could be worth around £200 billion a year to the economy if it matched the transformational impact of the steam engine, computers or the internet.

“And so today I am announcing that we will create 2,000 elite AI scholarships for disadvantaged young people and double the number of Turing AI world-leading research fellows, helping to ensure that the most exciting industries and opportunities are open to all parts of our society.”

Mr Sunak also confirmed more than £500 million in fresh funding to help people back into work as he seeks to stem the continuing turbulence of the coronavirus pandemic.

Ahead of his speech, he faced questions about whether he would have to add to the historically high tax burden beyond April’s planned 1.25 percentage point increase in national insurance.

The Chancellor was asked repeatedly about whether he would approve further tax increases, including a hike to council tax to help fund social care after a warning from local authorities.

Mr Sunak told Sky News he would not “pre-empt” the local government finance settlement later in the year and added to LBC he “never can comment about future tax policy”.

Asked about a possible increase to income tax before the next election, he told BBC Breakfast: “Recently we did make a significant announcement on tax and it was a difficult decision to make, especially for a Conservative Chancellor and a Conservative Prime Minister.

“But we took that decision because we wanted to make sure the NHS got the significant funds it requires to help recover strongly from coronavirus.”

Funding for the new jobs package in his conference speech will not be set out until the spending review and Budget later this month.

Foreign Secretary Liz Truss said the party needed to have a “laser-like focus” on people’s living standards and opportunities going into the next election, looking at “Lidl Tories” who did not necessarily come from traditional Conservative areas.

“When we get to 2024, or whenever the election is – and I’m not making any predictions – what people will care about is: do they feel their lives are getting better, are the prospects in my area better, are there job opportunities, are new enterprises thriving, am I able to afford to buy more each week to feed my family?

“That’s what most people think about when they come to elections.

“I think we’ve got to have a laser-like focus on making sure life is getting better for people.”

She added: “I am a low-tax Tory, and the Chancellor is a low-tax Tory as well and we want to bring down the tax burden.

“The best way to do that is to get economic growth going.”