Brown to fund services with borrowing spree

Gordon Brown will be forced to admit this week that he has forsaken prudence and borrowed to pay for Labour's ambitious programme of improved public services.

The Chancellor faces a difficult three days, as he is attacked over business taxes, accused by the Tories of being wilfully optimistic in earlier economic forecasts, and faces questions about what happened to his "golden rule" for government borrowing.

Mr Brown has said that over an economic cycle, the Government should not borrow money to meet its revenue costs, but only to invest. In Wednesday's autumn statement, he will have to admit that this year's tax revenues have been well below the forecast, compelling him to add billions to public borrowing to avoid either public spending cuts or tax rises.

Tomorrow, he will face business leaders at the annual CBI conference in Manchester, where he will hear complaints that business taxes are already too high.

Digby Jones, the head of the CBI, intends to warn Mr Brown: "We are now seeing real erosion of our competitive position. The Treasury rightly points out that it has cut corporation tax but this is only 30 per cent of the total business tax burden. It is the other two- thirds of business taxes that are rising sharply."

The Chancellor will use his speech tomorrow to emphasise that the UK has been hit by a sharp slowdown in the world economy, with the three biggest economies - the US, Japan and Germany - all in recession simultaneously, for the first time in 30 years.

He will emphasise the importance of allowing what he calls the "enterprise economy" to reach every corner of the country. On Wednesday, Mr Brown is expected to announce 2,000 new "enterprise areas" located in neighbourhoods where there is high unemployment. Anyone starting up a business in an enterprise area is entitled to government help with investment and administrative costs.

Mr Brown will also allocate pounds 60m to schemes to give schoolchildren a week's "meaningful and serious" experience of business.

The Chancellor is expected to tell the CBI: "I want to see a Britain where enterprise is open to all from the board room to the classroom."

The Chancellor's claim that world recession upset his economic forecasts has been scathingly dismissed by the Conservatives.

The Shadow Chancellor Michael Howard said: "The point Gordon Brown conveniently ignores in his attempt to blame the rest of the world is the fact his budget forecast was singularly more optimistic than the consensus of economic forecasters, who said that growth would be 1.9 per cent, rather than the 2.4 per cent in Mr Brown's budget. If they could see it happening, why couldn't he?"

Business View, Business, page 2

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