Prime Minister Gordon Brown said on Thursday the Conservative Party's tax plans did not add up, seeking to regain the initiative on the top election issue after business leaders backed the opposition.

Brown has faced criticism from business groups and more than 60 large employers over his Labour Party's proposal to raise the National Insurance payroll tax. Critics say it would cost jobs and undermine recovery from a deep recession.

Bosses reacted with anger after Brown said they had been deceived by the Conservatives, who support a more limited tax rise that would effectively exempt seven out of 10 workers.

Brown is aiming to turn the row to his advantage, saying the Conservative plans would require an additional 6 billion pounds of savings this year on top of 15 billion pounds the government has already earmarked.

"Do the British people really want to gamble (their) economic future on the basis of a back-of-an-envelope set of calculations like this?" he told reporters.

The row has taken centre-stage since Brown announced on Tuesday that the election, which promises to be the closest race in almost 20 years, would be held on May 6.

CLOSE RACE

Labour trails the Conservatives in opinion polls, but the gap has narrowed and the latest surveys suggest no single party may win an overall parliamentary majority.

That has led foreign exchange strategists to downgrade their views on sterling for the coming year. They fear a government reliant on rival parties for support in parliament may struggle to tackle a bulging budget deficit.

Brown pledged in a speech later on Thursday to crack down on excessive bankers' bonuses, if he wins the election, by giving the country's financial watchdog the power to strike down payments that encourage reckless risk-taking.

Bankers' bonuses have become a sore point in Britain after the government was forced to pump billions of pounds into shoring up the banking sector during the financial crisis. All the main parties want to rein in excessive bonuses.

Brown also pledged not to raise capital gains tax or corporation tax, levied on company profits.

The latest Reuters/Ipsos MORI poll on Thursday said voters in constituencies narrowly held by Labour, which will be crucial in deciding the outcome, remained unconvinced by Conservative leader David Cameron and preferred Brown.

A strong rebound in industrial output and house price data on Thursday strengthened economists' hopes that economic recovery had remained on track during the first three months of 2010.

The Conservatives are seeking to use business support over National Insurance as evidence that they have the right economic plans to help Britain address a record budget deficit and secure recovery from the deepest recession since World War Two.

Cameron, flanked by veteran actor Michael Caine at a news conference, said more company bosses had added their names to the list of backers and the government was looking "rattled."

"You've got some of Britain's biggest and most successful business leaders saying ... the threat to the recovery is not cost savings and cutting out waste, the threat to the recovery is Labour's jobs tax," Cameron said.

However, the Guardian newspaper reported in its Friday edition that the Conservatives' new focus on limiting tax rises worried investors and economists who supported the party's earlier tough line on reducing the deficit.

It quoted Tim Besley, a former member of the Bank of England monetary policy committee, as saying too much "election froth" over tax reduction risked distracting voters from the importance of repairing the public finances.

Michael Amey, UK portfolio manager for Pimco, the world's largest bond investor, was quoted as saying that statements focussing on what would be given away rather than what would be taken back were "not good news from a market perspective."