Brown to slash growth forecasts but stick to spending plans

Gordon Brown will today insist that he will not be forced to cut his multibillion-pound spending plans in the face of a global economic downturn that has plunged Britain's public finances into the red.

Speaking ahead of Wednesday's pre-Budget report, the Chancellor is expected to rule out increases in taxes or cuts in spending in order to make up for a dramatic slump in government revenues.

His remarks, to be delivered to the CBI's annual conference, may help to assuage some of the anger in the business community which yesterday lashed out at the Government's record on tax and regulation.

Mr Brown is expected to say: "Some have suggested that, instead of holding firm to our long-term course, we should cut spending and borrowing irrespective of the stage of the economic cycle and the needs for public investment on transport and other infrastructure. In my view, the consequences of such a short-termist and deflationary approach would be higher unemployment, depressed demand and low growth with infrastructure the first casualty of the cuts."

His remarks, however, will be a clear signal that he has been forced to slash his growth forecasts from the Budget predictions of April. Growth this year could be as low as 1.5 per cent compared with his forecast of 2 to 2.5 per cent, while 2003 could be cut from a forecast of 3 to 3.5 per cent to as low as 2.25 per cent.

Together with falls in tax receipts and huge increases in spending under way, this will push the public finances deeper into the red. But the Chancellor will insist he will not break his "golden rule" to balance the books over the economic cycle: "There's no credible and prudent option other than setting fiscal policy within a long-term framework adjusted for the economic cycle."

His speech will be seen as an attempt to soften growing anger among businesses in the light of claims by the CBI that the tax burden on business will have risen by £47bn by 2005.

Yesterday, the CBI published an opinion poll of business leaders showing that two-thirds believed that the Government had become more hostile to businesses in the five years since Labour won power.

Its survey of 256 executives also showed that 60 per cent believed that the Government would become even more unfriendly to them over the next five years. About 70 per cent said Labour had a poor understanding of how businesses were operated while three-quarters said taxes had risen since 1997.

Digby Jones, the director general of the CBI, said: "This is a big wake-up call for the Government and we hope that Gordon Brown will listen and give us some answers when he addresses the conference."

He renewed his attack on the planned increase in national insurance contributions for both employers and employees that comes into force in April next year.

The survey also highlighted mounting concern over militancy among public sector workers and fears over its impact on wage claims.

However, the survey did provide some relief for Mr Brown, as most business leaders rated macro-economic stability as their top priority.