Brown has 'fiddled' Golden Rule of finances

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Opposition politicians and independent economists criticised the Chancellor for "moving the goalposts" over the way the public finances are assessed. The Chancellor's manoeuvre, which was accompanied by hints of a move to 10-year spending plans, was seen by Labour MPs as part of Mr Brown's timetable to take over from Tony Blair.

However, commentators warned it could leave Mr Brown with a bigger financial headache after he becomes Prime Minister.

The Chancellor yesterday announced the Treasury had decided the current economic cycle had begun in 1997, two years earlier than previously thought.

When Labour won power in 1997, Mr Brown pledged to balance the budget on day-to-day spending when averaged over the economic cycle. By moving the start of the cycle back two years, the Treasury could include an extra £9bn of surpluses to help offset deficits it has racked up in the start of the global economic downturn.

Economists said this would allow him to delay the start of the next cycle but warned it would postpone rather than cancel the need for big tax rises. The shadow Chancellor, George Osborne, said it was a "smokescreen", which made "the fiscal rules meaningless".

He said the move would mean Mr Brown would face a tough decision in 2007 over whether to raise taxes or cut public spending.

The Liberal Democrat Treasury spokesman, Vince Cable, said that Mr Brown was "making a mockery" of his own fiscal rules.

"This move shows again the need for independent scrutiny of fiscal policy," he said. "For too long the Chancellor has been setting his own tests and then taking the credit for having passed. He should admit he has made a mistake this time."

Economists said the Chancellor's move came against a background of growing concern among the banks that lend him money that the public finances are running out of control.

Phil Shaw, chief UK economist at Investec, said: "Today's move provides the Chancellor with a 'get out of jail free' card for now.

"But it does nothing to address what appears to be a sticky fiscal position in the next economic cycle. He will have to bite the bullet and tighten fiscal policy to shore up the public finances."

Jonathan Loynes, the chief UK economist at Capital Economics, said: "We think taxes will be raised by £10bn per annum in next year's Budget."

Meanwhile, Mr Brown announced he was delaying his decision on spending over the next three years by a year to 2007. Instead, next year he will publish plans outlining pressures on public spending from the ageing population, infrastructure investment needs and the competitive challenge from China and India.

Ian McCafferty, the Confederation of British Industry's chief economic adviser, said: "By delaying the view the Chancellor seems to be denying his Government the opportunity to re-examine the options for spending restraint in 2007. Without such restraint further - potentially damaging - tax increases will be hard to avoid."

In a decision believed to have been agreed in consultation with Mr Blair, the Chancellor will call on Whitehall departments to stick to existing expenditure plans up to the end of financial year 2007-8.