Page last updated at 01:37 GMT, Tuesday, 11 November 2008

Tax cuts can help economy - Brown

Gordon Brown and Lord Mayor Ian Luder
Gordon Brown wants to maintain the initiative on the economy

Gordon Brown has fuelled talk of possible tax cuts by saying they could help to support consumer spending.

In a speech in London, Mr Brown referred to planned tax cuts in the US and Germany, saying countries must "work together" to tackle the downturn.

Earlier, the PM said he was looking "at everything" that could help the economy and would announce details within days.

David Cameron says the Tories will announce "tax changes to encourage businesses to take on workers".

Government action

The Lib Dems have already said they would cut taxes for lower paid people and have challenged the two main parties to "put their money where their mouths are" when it comes to tax pledges.

Economic recovery will work better if we all work together
Gordon Brown

Mr Brown has said that any potential tax changes are a matter for the pre-Budget report, expected next week.

In his annual speech at the Lord Mayor's Banquet, Mr Brown said that "people are looking to governments for action" in helping them through the troubled economic times.

He drew attention to planned fiscal stimulus packages in Germany and the US as well as China's move to pump $600bn in its economy, all aimed at encouraging people to spend more.

"With Britain continuing to lead the debate, economic recovery will work better if we all work together," he said.

"The benefits of any individual country's fiscal action will be all the greater if this is part of a concerted and fairly distributed international response to maintain global demand."

The BBC's Nick Robinson said Mr Brown was dropping hints that he would be prepared to borrow more to fund tax cuts but that nothing was certain until the details were confirmed.

Asked about possible tax cuts earlier in the day, Mr Brown said petrol duty had been frozen and people were already getting 120 back in their income tax - the government raised the personal tax allowance following the 10p tax row.

TAX PROPOSALS
Labour: Raised personal tax allowance to benefit basic rate taxpayers by 120 this year after 10p tax row, stamp duty threshold raised, 2p fuel duty rise postponed. Any further cuts expected to come in pre-Budget report
Conservatives: Abolish stamp duty for first time buyers on homes up to 250,000, raise inheritance tax threshold to 1m, cut corporation tax from 28p to 25p, encourage council tax freeze. Expected to unveil more tax cuts on Tuesday
Lib Dems: Have already pledged to cut spending by 20bn to help fund tax cuts for low and middle-income families by cutting basic rate from 20p to 16p. Would remove tax loopholes for the rich

"What I'm determined to do is get all countries around the world trying to get their economies moving again," he told GMTV.

"And one way you can do that is by putting more money into the economy by tax cuts or public spending rises but that's something we have got to look at in the next few weeks."

On Monday, David Cameron told journalists they would have to "wait and see" what the party's tax proposals were but said there were some clear principles:

"We want to help and we will help and we will put money back in people's pockets," he said.

There have been reports the party may propose a National Insurance payments holiday for new workers, to encourage employers to take on staff.

He also warned against permanently damaging the public finances and criticised the government for having an "enormous budget deficit even before the recession began".

"This government is talking and behaving as if there's no limit to what you can borrow," he said - adding any new proposals had to make clear where the money was coming from.

The prime minister's spokesman said that increasing borrowing was now the accepted view across the world and the government would have to look at all the issues relating to tax and spending.

Lib Dem leader Nick Clegg told the BBC other parties were "clambering on the bandwagon" as the Liberal Democrats had been advocating tax cuts for low and middle income earners for months.

'Rebalance' taxes

But he said: "We are the only party saying that tax cuts have got to be big, they have got to be permanent and they have got to be fair."

FROM THE TODAY PROGRAMME

He said it was time to "rebalance the tax system to make it fairer" by removing "loopholes" that benefit only the rich on capital gains and tax relief on pension contributions, as well as clamping down on tax avoidance and introducing more green taxes.

Former Chancellor Ken Clarke said previous efforts to boost economic demand had clearly not worked and called for cuts in VAT to encourage consumers back into the shops.

In Monday's speech, Mr Brown also argued that world leaders have a major opportunity to rebuild the international financial system.

Ahead of a meeting of leaders of the world's 20 major economies in the US at the weekend, Mr Brown said that recent co-ordinated global action during the credit crisis showed the potential of a stronger multilateralism, with US and Europe in the lead.



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