The next Conservative leader must “turn on all the taps” in the next spending review when it comes to helping poorer families, an influential Tory think-tank has urged.

After years of austerity, a report published by Onward has called on the party to slow down in its attempt to close the deficit and instead use the money to invest in key public services.

By keeping debt flat – or falling as a share of GDP – the government could create space for tax cuts and spending increases worth £190 billion over the next four years, the study claimed.

“In this year’s spending review, it’s time to turn on all the taps and make sure that poorer families and poorer areas really feel the benefit of a growing economy,” said Tory MP Neil O’Brien, who authored the report.

“The way to build a strong economy is from the bottom up,” he continued. “More geographically balanced economies are stronger.

According to the report, the next Tory leader must invest heavily in public services – particularly the police, prisons and schools, with plans to take per pupil school funding to a record high.

Other recommendations include:

• Cutting tax in poorer areas.
• Raising the National Insurance Primary Threshold to £13,000 for people with children – a change predicted to raise post-tax income by up to £1,100 for two-earner couples.
• Increasing Universal Credit work allowances and creating separate work allowances for second earners. According to the report, this could boost incomes for low-income families by as much as £4,300.

Meanwhile, Onward has called for corporation tax to be slashed to 12.5% in a bid to increase investment in the UK, as well as “dramatic” cuts to tax on business investments.

“We need to cut Britain’s uniquely high taxes on investment and tackle Britain’s chronic under-investment once and for all,” O’Brien added.

“And we must learn from countries like Ireland which have used lower taxes to attract vast inward investment, which has transformed their economy and seen their living standards overtaking ours.”

A number of senior Tories in the leadership race have already commented on the findings, with Michael Gove calling O’Brien “one of the Conservative Party’s great thinkers”.

“We need to show that it’s the Conservatives who offer the best alternative to Jeremy Corbyn as we set out a positive vision for the future of the UK,” he said.

Meanwhile, health secretary Matt Hancock said the great challenge of the 2020s would be to “win the battle for free enterprise once again”.

“To win the case for capitalism we must deliver higher pay and rising living standards, using the fruits of a strong economy to help people be better off, reach their aspirations and lead more fulfilling lives.”