Gordon Brown was accused yesterday of failing to meet the key economic goals he set when Labour came to power, including the promise to end the "boom and bust" cycle.
A report examining Britain's economic performance since 1997 claims the Chancellor has squandered the favourable economic conditions inherited from the Tories and paved the way for raised taxes and drops in competitiveness and growth.
But the conclusions by the Centre for Policy Studies have been condemned as "grossly misleading" by the Treasury.
The right-of-centre think-tank's report, entitled "Gordon Brown and British Competitiveness", says taxes are up and income is dropping.
"Much of the golden economic legacy that Gordon Brown inherited in 1997 is in danger of being frittered away," said Keith Marsden, its author.
Mr Marsden, an economics consultant to several UN agenciesadded: "Growth is down - at a cost of income foregone of nearly £2,000 per household per year. Taxes are up by £4,000 per household per year. Savings, investment and productivity growth are all down. Regulations are damaging business, with the rate of start-ups now worryingly low. The balance of payments is deep in the red. Deflation is a real threat."
GDP growth in 2003 would fall well short of the 2-2.5 per cent predicted in the April Budget, he said, so it was "not surprising" Government members had hinted at tax rises.
But a Treasury spokesman criticised the report, saying: "There has been a difficult global environment, since 2001 particularly, but the UK and US led the G7 in growth in 2002 and outside forecasters expect that to be the case this year and next."
Tony Blair's close friend Lord Falconer dealt Mr Brown another blow when he said the Prime Minister was committed to serving a full third term.
Mr Brown's allies hoped he would take over as Prime Minister soon after the next election, but Lord Falconer said in The Sunday Telegraph there was "no doubt" the Chancellor would stay on for the duration of the next parliament.
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