Press Association
Wednesday 7th January 2009
Gordon Brown denied gambling with the nation's finances as he prepared to pump billions of borrowed pounds into the economy in a bid to stave off recession.
On the eve of a Pre-Budget Report expected to see Value Added Tax slashed to get Britain spending, he said a "substantial" Government intervention was the only sensible response to the downturn.
The Tories accused the Prime Minister and Chancellor Alistair Darling of preparing a "tax bombshell" further down the line to pay off massively higher borrowing to fund the package.
Mr Brown promised that the Government's long-term plans to pay off the debt - predicted to soar above £100 billion - would be laid out for voters "fairly and squarely".
While details of the highly-anticipated PBR were being kept under wraps, its centrepiece is thought be a cut in VAT from 17.5% to 15%. Such a move would cost £12.5bn, accounting for much of the £15 to £20bn cost of the Government's Keynesian-style intervention to boost the economy. Its appeal lies in bringing down the cost of goods to spur consumer spending and get the shrinking economy moving again.
The Prime Minister dismissed the Government's strategy was a gamble with the public finances, which could merely end up saddled with higher debt. "I don't see this as a gamble," he told BBC1's The Politics Show. "I see this as necessary, responsible action that any sensible government would want to take."
As well as the VAT change, the PBR is expected to include further tax cuts targeted at the least well off. Other options include postponing the introduction of increased vehicle excise duty for older vehicles and taxpayer-funded guarantees on loans to small businesses.
Tory leader David Cameron said the public would be "shocked" by the level of Government debt laid out by the Chancellor.
Mr Cameron warned public borrowing could top £100 billion to pay for Mr Brown's "fiscal stimulus" package to rescue the ailing economy. He said the PBR may not lead to any lasting benefit because people would be aware of the "tax bombshell" they face in future years to repay the national debt.
The Conservative leader called for further interest rate cuts and Government guarantees for loans to small firms in an effort to help homeowners and businesses.
