Chancellor 'faces tax rise call'

Mr Brown says the UK is growing faster than its main European rivals

Gordon Brown may have to raise taxes after he suggested UK economic growth would be lower than the government had forecast, a business group has warned.

The Centre for Economics and Business Research (CEBR) said Britons could face "stealth taxes" equivalent to three pence on income tax.

Mr Brown had forecast that UK growth would be 3-3.5%, but analysts believe that figure could now be 2.5% or less.

The CEBR said the chancellor had been "over optimistic" in his predictions.

'Weaker economy'

Speaking in Washington, Mr Brown told the BBC that the sluggish global economy, oil price rises and a "house price bubble" had all taken their toll on the UK economy.

While he did not downgrade the Treasury's current official forecasts for growth, analysts believe Mr Brown's comments could eventually lead to such a move.

CEBR chief executive Douglas McWilliams criticised the chancellor for failing to take notice of reports by some independent forecasters suggesting that the UK economy was slowing down.

"While it is certainly true that high oil prices are likely to mean a weak economy in 2006, the current year's slowdown started just after Christmas and ought to have been staring the chancellor in the face when he made his forecasts for the March Budget," he said.

Mr McWilliams added: "He has only two choices - cut spending growth or raise taxes. If the latter, watch out for a mixture of stealth taxes that will be the equivalent of three pence on income tax."

Mr Brown has said he remains confident that the UK economy is strong and that it will continue to grow faster than any other major European economy.

He told a meeting of the International Monetary Fund in Washington on Saturday: "Britain is continuing to grow faster this year than the other major European economies, all of whom are forecast to grow by less than 2%, with just 1.2% growth in the euro area."

IMF experts believe that the UK's gross domestic product (GDP) will grow by 1.9% in 2005.