The prime minister said he should have put the "whole public interest" before the banks but had "learnt" from the experience.

'Complaints'

Mr Brown said: "In the 1990s, the banks, they all came to us and said, 'Look, we don't want to be regulated, we want to be free of regulation'."

"All the complaints I was getting from people was, 'Look you're regulating them too much'. And actually the truth is that globally and nationally we should have been regulating them more," he added.

"So I've learnt from that. So you don't listen to the industry when they say, 'This is good for us'. You've got to talk about the whole public interest."

Schools Secretary Ed Balls, who worked with Gordon Brown when he was chancellor, said both had previously admitted they should have done more to control the financial sector.

At Labour's morning press conference he said: "In retrospect we should have been tougher with some of the investment banks which did not know the risks they were running. This was a problem for governments around the world."

Business Secretary Lord Mandelson added: "Regulation should have been more intrusive and the regulatory practice of the FSA [Financial Services Authority] should have kept pace with the fast-changing developments in the financial services sector."

Shadow chancellor George Osborne said: "So finally Gordon Brown admits he failed to regulate the bankers and increased taxes on the poor. We've had 13 years of his economic mistakes. Britain can't afford five years more."

Lib Dem Treasury spokesman Vince Cable said: "It's not enough just to hold your hands up and say sorry without having a plan for making sure that the same thing doesn't happen again."
. . . .

In other election developments on Tuesday:

• Plaid Cymru launched their manifesto and promised to fight for more resources for the Welsh Assembly
• The UK Independence Party also launched - pledging UK withdrawal from the European Union
• The Scottish Socialist Party  unveiled their manifesto, offering an alternative to the "doom and gloom of mainstream parties"
• Nick Clegg says the Lib Dems would crack down on "obscene" bankers' bonuses and allow "no reward for failure"

In a speech launching the manifesto at Battersea Power Station in south London, Mr Cameron said it was the "the biggest call to arms this country has seen in a generation".

He said no government could solve all problems on its own and he wanted "everyone to get involved", adding government should be the "partner of the big society, not its boss".

BBC political editor Nick Robinson said there was a "difference in philosophy" between the Conservatives and Labour, with the Tories saying "government needs to be pushed along" by the general public, while Labour was pledging that "government can be on your side".

Mr Cameron said he had taken the Tories back to the "centre ground" of politics, away from the "narrow focus" it had in the past: "We stand for society, that's the right idea for a better future."

The Tories' plan to block the bulk of Labour's planned 1% rise in National Insurance is in the manifesto. Mr Cameron said it would save more than 50,000 jobs and would make "seven out of 10 working people better off than under Labour".

Labour say Tory plans to cut "wasteful" government spending by £12bn this year to fund the policy are based on "fantasy" calculations and are reckless.

Mr Cameron said: "Labour say the economy will collapse unless they keep on wasting your money."

He accused the government of trying to "frighten" people while he presented an "optimistic" programme and would "trust" people.

Local referendums

The Conservatives could "make things better without spending more money", he said, and had radical plans to "help the poorest, protect the NHS, help people find work and support families".

"This is a manifesto for a new kind of politics," he said.

"People power, not state power."

Among pledges in the manifesto are a community "right to buy scheme" - to allow people to protect post offices and pubs threatened with closure.

People would be able to get local referendums on any issue if 5% of residents backed it - and would be able to use them to veto high council tax rises.

The number of MPs would be cut by 10%, and ministers' pay would be cut by 5%, followed by a five-year freeze.

Parents and charities would be allowed to set up state-funded schools - based on a model used in Sweden - and "unaccountable" police authorities would be replaced with a directly-elected official to set policing priorities, budgets and strategies.

Mr Cameron dismissed suggestions that there was no demand for people to set up their own schools as "cynical".

He said a network already set up to help them do just that had been "inundated" with offers and there was a "huge appetite" for people to get involved.

Other pledges include raising the stamp duty threshold for first-time house buyers to £250,000, to raise the inheritance tax threshold to £1m, to freeze council tax for two years and a voluntary "national citizen's service" for 16-year-olds.

Stamp duty

As well as pledges to reform out-of-work benefits, scrap ID cards and increase health spending, there is also a pledge for an annual cap on non-European Union migrants who are allowed to live and work in the UK.

And there would be a referendum on any future European treaty "that transferred areas of power or competences" from Britain to the EU.

BBC chief political correspondent Laura Kuenssberg said there were no new details of how the Conservatives would reduce the budget deficit - something the party have pledged to do "faster" than Labour, who say they will halve it in four years.

None of the main parties has definitively ruled out raising VAT and the Conservatives also do not make a pledge on income tax, which Labour have said they will not raise.

But shadow foreign secretary William Hague told the BBC: "The plans we have don't involve raising VAT. We are not looking for tax rises. People feel over-taxed."

Ken Clarke, shadow business secretary, later told the BBC that politicians should be "ignored" if they make firm promises on tax, unless it is part of a Budget.

"So any politician who starts telling you firmly what he's doing in tax should be ignored unless he's Chancellor of a very good budget," he said.

The UK Independence Party has launched its own manifesto, called "empowering the people", and has pledged not to field candidates against any "committed Eurosceptic" from other parties - including six Conservatives.

Labour launched their manifesto on Monday, pledging a "fair future".

Gordon Brown said there was a "complete hole" at the centre of the Conservative manifesto and it showed the party "hasn't changed".

"There is nothing in it to help the recovery. Indeed their measures would put the recovery at risk," he said.

"They are saying you are on your own. They are leaving people on their own to face the recession."

Lord Mandelson - who is heading up Labour's election strategy - said a "do-it-yourself" agenda for public services would not work "unless the frontline is properly protected and properly funded", and said Tories would "cut spending very sharply" to fund all their pledges.

Lib Dem leader Nick Clegg, who will launch his party's manifesto on Wednesday, said: "It's a manifesto of style over substance, you can't trust the Conservatives when they want to give tax breaks to double millionaires, not tax breaks to everybody else."

Mr Osborne, in his first speech since becoming chancellor, said the newly formed independent Office for Budget Responsibility would publish economic and fiscal forecasts, rather than the government.

He said these forecasts, the first of which will come out before the Budget, would create a "rod for my back down the line and for future chancellors. That's the whole point."

'Wrong direction'

Mr Osborne said: "This is an enormous thing for the chancellor to give up... I'm deliberately doing this because I don't think it [the current system] produces good Budgets."

Mr Osborne said Labour's economic forecasts had mostly been wrong and "almost always in the wrong direction".

The coalition's changes could "enhance" frontline services, he argued, saying: "In the end this is about value for money."

He also said: "I'm absolutely clear that, alongside reform, we can improve the quality of education that people receive and the healthcare that people receive."

Mr Osborne said: "The Treasury's assessment is that there is a strong economic case for an immediate spending reduction of £6bn. So we are in no doubt that this action is advisable. By tackling wasteful spending now rather than later, we can demonstrate our commitment to tackling the deficit."

The chancellor said he would like his first Budget to be about "handing out goodies", but the UK had to "live within its means" and the deficit was the "most urgent issue" facing the government.

Liberal Democrat David Laws, the Chief Secretary to the Treasury, said the task ahead was "colossal" and that Labour had left the public finances in an "unacceptable" state.

The reductions would amount to about 1% of government spending, he added.

Mr Laws said his predecessor, Liam Byrne, had left him a letter saying simply: "Dear chief secretary, There's no money left."

Union warning

Before becoming government partners, the Liberal Democrats had argued that spending cuts should be delayed until next year. However, the coalition deal meant they signed up to the immediate budget reduction plan.

Mr Laws, will meet cabinet colleagues later this week to agree where the £6bn of cuts will fall.

He said every new spending commitment and pilot project signed off by Labour ministers since the turn of the year would be individually reviewed in a bid to find savings "in addition" to the target.

But TUC general secretary Brendan Barber said: "With the economy so fragile and thousands still losing jobs, the government needs to avoid rushing into a round of cuts.

"If the economy suffers as a result of decisions taken ahead of the emergency Budget, tax revenues will fall and the deficit will only get worse. This is not a time to wield the axe without very careful consideration of the wider consequences."

On Sunday, Prime Minister David Cameron told BBC One's Andrew Marr Show on Sunday that an audit of the government's books had already found some "crazy" spending decisions.

As an example, the prime minister highlighted the fact bonuses were paid to 75% of all senior civil servants.