Page last updated at 23:33 GMT, Monday, 17 November 2008

Cameron warns of 'tax bombshell'

Gordon Brown and David Cameron clash over the state of the UK economy

David Cameron has told Gordon Brown to "be straight with the British people" and admit his plans to borrow more will mean "higher taxes tomorrow".

The Tory leader said the PM was planning a "borrowing bombshell which will soon become a tax bombshell".

Mr Brown said the Tories were "out of touch" as there was a consensus across Europe in favour of a fiscal stimulus.

The government is expected to unveil tax cuts, funded by extra borrowing, in its pre-Budget report next week.

In a Commons statement on the G20 financial summit at the weekend, Mr Brown said "fiscal action" was needed and said the "downturn" could be shorter and less deep if that was matched across the world.

International consensus

He said there was an "emerging consensus" around the world on the need for rapid and coordinated action though the use of budgetary measures.

But Mr Cameron said there were few words on fiscal stimulus in the "G20 communique"- and those that there were had caveats.

"The real international consensus is that it's only the countries that have been fiscally responsible that are best placed to act now," he said.

Everyone knows the prime minister is planning a Christmas tax giveaway, but tax cuts should be for life, not just for Christmas.
David Cameron

The Tories say British borrowing is among the highest in the world.

Mr Cameron said: "In Britain, more discretionary borrowing now, without knowing where the money is coming from is bound to mean higher taxes later."

"Borrowing 30bn now will mean an income tax bill for the average earner of nearly 1,500 later.

"Everyone knows the prime minister is planning a Christmas tax giveaway, but tax cuts should be for life, not just for Christmas. We need real tax cuts not tax cons."

Employment minister Tony McNulty told the BBC that he accepted that tax cuts would have to be paid back - but they were a "short term" solution to the current situation.

Speaking on Newsnight, he said: "This is about getting back into equilibrium as early as possible.

"Over the cycle of course, it has to be paid back but that will be by increased receipts."

Deflation danger

Earlier, Mr Brown accused the Conservatives of being wrong in all their calls on dealing with the economic crisis - from nationalising Northern Rock to opposing action against share speculation.

"I come to the conclusion that they do not understand what's happening in the world economy," he said.

He said the danger next year would be deflation, adding: "This seems to be the only party that is now standing against what is a consensus developing across Europe and across the world.

Gordon Brown: 'It is right that we support families and businesses'

"That unless you take the fiscal action that is necessary now, and help businesses and families now, you are undoing any benefit that can come from monetary policy and cuts in interest rates."

Mr Brown said: "The downturn can be shorter and less deep if Britain takes action and if that action is matched elsewhere."

The prime minister was jeered by Tory MPs as he said that the economic problems had "started in America" and Mr Cameron told him he had said it so many times it was "starting to sound ridiculous".

'Cash bribes'

But Mr Brown said: "Even the Americans agree the financial crisis started in America."

Liberal Democrat leader Nick Clegg said it was right to "give money back to people" but, instead of borrowing for a "one-off tax cut", he could get a permanent reduction for many by restructuring the system and ending "loopholes" for the wealthy.

"The right thing to borrow for is not short-term cash bribes but long-term capital investment in infrastructure the country needs anyway," he added.

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