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Thursday, 28 November, 2002, 23:31 GMT
Brown accused of 'Enron accounting'
Train on UK railways
The loan guarantee to Network Rail has caused a row
Chancellor Gordon Brown has been accused of "Enron style" accounting over the way a 21bn bailout for Network Rail was kept off the public balance sheet.

The Liberal Democrats and Conservatives say the way Mr Brown handled the loan guarantee to Railtrack's successor company shows he is set to borrow more than he admits.

The claims have been dismissed by the Treasury and earlier the chancellor said he was ready to stake his reputation on his overall borrowing decisions.

In his pre-Budget report on Wednesday, Mr Brown had to downgrade his previous forecasts and plug the gap by borrowing more than 100bn the next five years.

The report won support among Labour MPs, but opposition parties and some economists say Mr Brown may have got his forecasts wrong again.

The pre-Budget report said a world economic slowdown meant the UK economy would only expand 1.6% this year, compared with a forecast in April for growth of between 2% and 2.5%.

This, Mr Brown explained, meant borrowing in the year would be 9bn greater than earlier forecast.

Gordon Brown defended his borrowing move
And borrowing over the next five years would increase by 30bn on his April forecast to 102bn.

But the Liberal Democrats have now claimed they have unearthed a letter suggesting government auditors believed 21bn of potential rail liabilities should be counted as part of the public debt.

There was a row about the cash in June when the Office of National Statistics (ONS) said Network Rail was a private sector body.

At the time, the ONS said that verdict was based on the advice of senior government accountant Alan Beard.

In a letter written a month ago and published on Thursday, Mr Beard said his opinion had been misinterpreted - his view "does not necessarily support" the ONS judgement.

Liberal Democrat spokesman David Laws is demanding a statement from Mr Brown over the cash.

"This news is a huge blow to Gordon Brown's attempts to hide away up to 21bn of public sector borrowing...

Michael Howard, chancellor
Michael Howard lampooned the "downgraded chancellor"
"Gordon Brown has been caught trying to fiddle his own figures."

Shadow chancellor Michael Howard joined the attack, saying the letter was "authoritative confirmation" of Tory claims.

"This is yet further evidence of Gordon Brown's Enron accounting," said Mr Howard.

Mr Howard has already branded Mr Brown a "downgraded chancellor" after having to lower his growth forecasts.

Dismissing the latest claims, a Treasury spokesman said: "The decision on whether the money goes on the balance sheet is taken by the ONS, which is an independent body which bases its decisions on international accounting standards.

"It was not a decision by the Treasury. It is standard practice for government departments to be advised by the ONS how money should be shown up on the balance sheet.

"We are obliged to accept their decision."

Earlier on Thursday, Mr Brown hit back at critics who said his new borrowing put his reputation for prudence at risk.

"I take full responsibility for the figures and the decisions that I make," he told BBC Breakfast.

"But I think people will see themselves that the British economy, far from being in recession like other countries, is a British economy that is growing and that is as a result of the difficult decisions we have made over the last five years."

Mr Brown said the historically low levels of current debt allowed him to borrow and stay within his fiscal rules.

Mr Brown's "prudence" was praised by TUC general secretary John Monks.

"It is a tribute to the chancellor's stewardship of the economy that even at a time when the world economy faces real difficulties, he is able to stay on track with sustained increases for public services and real boosts for those on low incomes," said Mr Monks.

The BBC's Rebecca Pike
The Chancellor is having to borrow nearly double what he expected to fund his ambitious spending plans"
Chancellor Gordon Brown
"Pay must be matched by productivity"
Former Chancellor Ken Clarke
"No-one can predict the economy with certainty"

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