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Monday, October 19, 1998 Published at 08:58 GMT 09:58 UK

UK Politics

Maude warns of spending 'black hole'

Frances Maude: Britain is "slipping into recession"

Shadow Chancellor Frances Maude says government plans to spend £40bn on schools and hospitals are at risk if the economy continues to slow down.

Ministers have dismissed the comments, saying their spending plans are safe.

Mr Maude told BBC Radio 4's Today programme: "There is a huge black hole appearing in the public finances.

"It was madness to embark on a public spending programme committing the country to spending, three years in advance, money that it hasn't yet earned when there were so many risks around."

He repeated calls for a reduction in interest rates and demanded to know whether the government was going to cut spending, increase borrowing or raise taxes to honour its promises.

If borrowing was increased, Mr Maude said it would leave Gordon Brown's reputation as the 'Iron Chancellor' "in tatters".

'Stealth taxes'

He said he expected the government to raise what he called more "stealth taxes ... designed to conceal their effect".

Mr Maude's attack comes as the Bank of England finds itself under renewed pressure to lower interest rates, after the American central bank reduced its lending rates by a 0.25% on Thursday.

{ Image 2 The Chief Secretary to the Treasury, Stephen Byers, said the government would stick to its commitments on health and education.

"We do not believe it is madness to spend £40bn on our schools and hospitals. And we can do that without risking our public finances because we have been sound and we have been prudent."

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