London Editor in Manchester

George Osborne yesterday promised cash to end mobile telephone black-spots that blight rural communities as he ruled out tax cuts to lift the economic gloom.

The Chancellor has committed £150 million to install more phone masts, which will improve coverage for six million people, to help small firms create jobs in the downturn.

Addressing the Conservative Party Conference in Manchester, his pledge to extend coverage to all but one per cent of the country by 2013 was among a raft of measures.

MPs welcomed the plan to tackle "digital desert islands" in the rural Westcountry, but countryside campaigners said more was needed so households and businesses could access emails and the internet on their handsets.

Mr Osborne, under pressure to devise a plan to kickstart the stagnating British economy, ruled out unfunded tax cuts or increases in public spending. He rejected calls to relax his deficit reduction policy – the so-called "plan A" – warning that additional spending would spook the markets and force up interest rates.

As revealed in yesterday's Western Morning News, the Chancellor confirmed an £800 million one-year council tax freeze.

Mr Osborne said he had considered carefully tax cuts and extra spending to kick-start Britain's stalled growth.

But he said it was "an illusion" to think that the injection of £5 billion or £10 billion into the economy would revive growth.

"Borrowing too much is the cause of Britain's problems, not the solution," he told the conference.

In a set of measures to assist small businesses, Mr Osborne confirmed the minimum time for an employee to work before making a claim of unfair dismissal will be increased from one year to two.

Mr Osborne also announced plans to inject money directly into parts of the economy which need it most, such as small businesses, in a process known as "credit easing".

In comments likely to anger environmentalists and dismay the Conservatives' Liberal Democrat coalition partners, Mr Osborne said that he did not want to see Britain's carbon emission reductions proceeding any faster than the rest of Europe.

Of the economy, he said: "I don't pretend to you that these are not difficult days and there are not difficult days ahead, but together we will ride out the storm and together we will move into the calmer, brighter seas beyond."

Labour's Treasury spokeswoman Angela Eagle said: "This hotch-potch of small measures and re-announcements shows how out of touch ministers still have no idea of the scale of the problem families and businesses are facing right now."

Around 2.5 million people in the UK do not have any mobile phone coverage, much less are hooked-up the 3G network which allows internet access through smartphones such as the iPhone.

The £150 million, to be paid for through a Whitehall underspend, should see 95 per cent phone coverage jump to 99 per cent.

The Government has lavished £530 million on broadband-starved communities, including giving Devon and Somerset £30 million.

Already, BT is installing the infrastructure for a £132 million scheme to deliver superfast broadband to Cornwall.

Geoffrey Cox, Conservative MP for Torridge and West Devon, said of the phone mast cash: "If we see the money in the far South West it will be extremely good news.

"But we have to be vigilant that this money reaches the parts other initiatives have not reached.

"We are still somewhat of a digital desert island in terms of broadband and mobile phone access."

The Countryside Alliance warned of an "unnecessary backlash" to more phone masts if communities are not consulted, and raised fears of rural towns and villages losing out when the next generation 4G network comes up for auction. Trials of the "spectrum" are currently taking place in Cornwall.

Sarah Lee, head of policy for the Countryside Alliance, said: "George Osborne's announcement will be welcomed by rural areas that currently suffer from poor or unreliable mobile phone coverage."