Labour to curb spending until 2001

CHANCELLOR Gordon Brown is planning three more years of Tory-style public spending curbs to take Labour up to the next election as "prudent" managers of the economy.

A tough package of economic measures to take over from the programme inherited from the Conservatives is being prepared for an election that could come a year early, in the spring of 2001. Westminster insiders are speculating that Tony Blair may go to the country after only four years, despite having the biggest Commons majority since the war.

The hard line on spending will be made clear in next week's Budget, which will also unveil the most radical reform of taxes and benefits for a generation. Mr Brown will disclose measures to make it easier for employers to take on lower-paid workers through changes in national insurance contributions, and a substantial rise in petrol prices of around 25p a gallon. A boost for small businesses is also certain to feature in Labour's second Budget in less than 11 months.

The Chancellor made clear his intention to keep a tight rein on public spending in a speech yesterday to the Scottish Labour Party conference in Perth, in which he rejected "quick fixes, easy options, wasteful handouts or taking risks with inflation".

He insisted: "My Budget will be prudent - prudent for a purpose. A Budget for enterprise and employment, which will help more people to work and work their way up, help make work pay, help men and women create new businesses and jobs."

Mr Brown's forward planning will be based on the Comprehensive Spending Review in every government department, initiated after Labour took power and due to report soon.

It will identify scope for savings as well as priorities for more generosity. Only education and the NHS can expect special treatment. Social security, transport and the arts are expected to fare worst. Mr Brown regards bringing down the National Debt - nearly pounds 20,000 per family and costing pounds 25bn a year in interest payments - as a prime objective. That was his answer to those who asked: "Why can't we spend more money today?"

A key theme in the Budget will be "making work pay" and ensuring that there is work for all who want it. Mr Brown will reduce employers' national insurance contribution for the lower-paid, balancing that with increases for the higher-paid.

Further increases in tobacco taxation will drive up cigarette prices, but the Chancellor could be more lenient on alcohol. The rise in petrol duties follows the announcement in the last Budget of an "accelerator" in pump prices of 6 per cent a year, to meet Britain's environmental treaty obligations.

But Mr Brown will be urged to do more this week by the influential new Environment Audit Committee, the parliamentary body set up to monitor the Government's "green" record. In a report to be published on Tuesday, the committee will accuse him of failing to implement pre-election promises of "green" taxes.

Treasury aides confirmed yesterday that Mr Brown will come down hard on tax loopholes.