Page last updated at 12:43 GMT, Tuesday, 11 November 2008

Brown backs 'unfunded' tax action

Gordon Brown at the press conference
Mr Brown called for a world trade deal to be struck within days

Gordon Brown has signalled his backing for "unfunded" tax cuts in the pre-Budget report to combat recession.

He told a No 10 news conference he wanted a further "fiscal stimulus" to "get the economy moving again".

He said it would "initially" be unfunded but claimed the Tories, who accuse him of planning a borrowing "splurge", also had unfunded plans.

The Tories have proposed "targeted" tax cuts which they say will not need rises in borrowing to fund them.

Conservative leader David Cameron said his proposals to give tax breaks to small businesses who take on unemployed workers were "fiscally responsible" as they would be paid for by savings in the benefit bill.

He said it was "a mistake" to believe the government could "borrow without limit" and spend its way out of a recession, arguing it will lead to higher taxes in the future.

'Low debt'

But Mr Brown said Mr Cameron's proposal was "an expensive one that doesn't necessarily guarantee that more jobs will be created overall".

He also hit back at Mr Cameron's claims Britain had one of the highest levels of debt in the developed world.

He claimed the UK's "low public debt" meant it could afford to borrow money to pump money into the economy.

The aim is to get the economy moving forward by higher levels of economic activity and that is precisely what we are doing
Gordon Brown

Pressed on whether there would be unfunded tax cuts in the pre-Budget report, expected next week, he said: "You have to take action that is initially unfunded because that is actually how you do a fiscal stimulus.

"The aim is to get the economy moving forward by higher levels of economic activity and that is precisely what we are doing."

He added: "Most of the Conservatives' tax cuts are also ones that they are unable to fund."

World trade

He attacked the Tories' economic downturn policy package, saying "it's confused, it's contradictory, it's ill thought-through, it's an initiative-a-day but actually not getting to the substance of what the real problem is".

He said other countries around the world - including incoming US President Barack Obama - were planning a "second fiscal stimulus" and Britain had to be seen to be leading the way.

"The more countries that are involved in this, the better it is going to be for the world and for us," he said.

We will need to get back to, over time, some degree of equilibrium in the economy, that is very very clear
Tony McNulty
Employment minister

He also announced a new "statement of principles" for high street banks to put pressure on them to lend to small businesses and action to encourage more responsible lending by credit card companies.

And he called for a world trade deal to be struck "over the next few days" to help tackle global economic problems. He rejected claims that Barack Obama's "protectionist" stance would damage hopes of a new world trade deal.

He said only "small differences" were now preventing the Doha round negotiations - which had stalled - being concluded.

Mr Brown told his media conference: "If over the coming days countries can resolve what I now regard as small differences it would send a huge signal to the whole world that the answer to 2008's crisis is not the beggar-thy-neighbour protectionism of past crises, but stimulating a world trade agreement."

Later employment minister Tony McNulty told BBC 2's Daily Politics that any "tax cuts or adjustments there may be" would be "funded in a transparent fashion, albeit from borrowing" while the Conservatives' plans were "pie-in-the-sky on a hope and a prayer".

Pressed on whether taxes would eventually have to rise, if borrowing continued to rise, he said: "We will need to get back to, over time, some degree of equilibrium in the economy, that is very very clear. But the question people will ask is: 'Doing nothing now, is that really an option?'"

He said if the economy recovered quickly and receipts to government "shoot up" "then the balance, if there is a balance, may need to be found from taxation".

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