Brown hints at major government intervention

Gordon Brown

Letting the recession run its course is not an option, Gordon Brown said this morning, paving the way for tax cuts and increased government spending in today’s pre-Budget report.

Speaking ahead of the pre-Budget report, Brown told delegates at the CBI annual conference that action is needed now to prevent permanent damage to the economy.

The Prime Minister said a substantial but time limited fiscal stimulus was needed now to boost the economy, keep businesses open and protect jobs.

But the leader of the Conservative Party, David Cameron, argued that lower interest rates and getting credit flowing were much more important than the fiscal boost at this time.

Brown told the CBI that although monetary policy – such as lower interest rates – has a role to play in tackling the economic downturn, it is not the only tool and it would be a “mistake” to rely on it entirely.

However, Cameron challenged this: “The Bank of England itself said that it had considered cutting interest rates by more [than 1.5% in November] but – in anticipation of a fiscal stimulus in the pre-Budget report – had decided not to. We have consistently argued that government must not do anything to make further interest rate cuts less likely.”

The Tory leader also warned that lower taxes today would mean hikes down the line: “Everyone knows that [the government’s] throwing money at us now to take it away at a later date.”