Sept. 8 (Bloomberg) -- U.K. Conservative Party leadership candidate Kenneth Clarke said the ruling Labour Party's economic record is an ``illusion,'' setting out his own pledges to promote business with fewer regulations and lower taxes.

Clarke, who oversaw the economy as chancellor of the exchequer from 1993 to 1997, said Labour's Chancellor Gordon Brown squandered the strong economy he inherited from Clarke.

``Far from building on the strong economy he inherited, growth and investment have been below what my party achieved before 1997,'' Clarke said in a speech today at Cass Business School in London. ``The U.K. is no longer the exciting place to do business that it was in the 1980s and 1990s.''

Clarke, who is rated as second-favorite for the leadership contest by bookmakers Ladbrokes at 5-2 odds, is seeking to showcase his credentials on the economy after the Conservative leader Michael Howard was unable to dent Labour's reputation for economic growth in the campaign for the May election.

Of the 51 consecutive quarters of economic growth which Labour cited in its winning bid for a third term in power, 19 were achieved when Clarke was in government as chancellor and home secretary, according to Bloomberg data.

After the May defeat, Howard said he would step down at the end of the year.

Flagging Growth

Growth of the U.K.'s gross domestic product is likely to slow to 2 percent this year from 3.2 percent in 2004 as increased household debt hurts consumer spending, the National Institute of Economic and Social Research says.

In an article in the Scotsman newspaper today, David Davis, the favorite for the leadership contest at odds of 4-7, said Britain's economic growth today is ``the worst since 1993.''

Both Davis and Clarke criticized Brown for raising household tax burdens after promising not to. While leaving income tax rates unchanged, Brown increased national insurance rates to fund higher spending on the National Health Service and other public services.

Now, higher spending means the government may have to borrow 140 billion pounds ($257 billion) between 2005 and 2009, NIESR says. That's 28 billion pounds more than the government projected in its March budget.

Clarke emphasized the need for ``honesty'' on taxes. He said he would cut taxation only once he could afford to do so. His priority would be to cut national insurance rates first, he said.

Third Term

Davis or Clarke would possibly face Brown in elections that must be held by 2010 should either of them win the Conservative leadership. Prime Minister Tony Blair has said he won't serve another term, and he has been urged to step down early so Brown or another Labour Party leader could take over before the next vote.

``Gordon is going to leave some grisly economic problems for his successor,'' Clarke said in his speech. ``His economic legacy will be a growing issue between now and the next election, and it will still haunt him if he becomes prime minister.''

Liam Fox, the Conservative lawmaker in charge of foreign affairs matters, also declared his candidacy today. Ladbrokes rates him fourth in the field of possible candidates, behind education spokesman David Cameron, at odds of 16-1.

The leadership contest may start in October, when the party is scheduled to decide on changes to the voting procedures for the post.

To contact the reporter on this story: Alexander Hanrath in London at ahanrath1@bloomberg.net.

Last Updated: September 8, 2005 08:25 EDT