Brown refuses to rule out tax rises to fill £10bn 'black hole'

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His comments came a day after the Organisation for Economic Co-operation and Development (OECD), the Paris-based intergovernmental organisation of 30 wealthy nations, warned that Mr Brown may have to raise taxes or spending if his forecast for corporate tax revenues fall short.

Independent forecasters have warned of a £10bn "black hole" in the public finances. The Chancellor admitted last month that he will have to downgrade his prediction the economy will grow by between 3 per cent and 3.5 per cent this year when he presents his pre-Budget report next month.

In an interview yesterday on BBC Radio 4, Mr Brown declined to give a promise not to increase taxes before 2008. "At the last election, even the Conservative Party said they could make no absolute promises about these issues. The last person who did so was John Major and he regretted it," he said.

"Our spending plans are affordable, they have been costed, they have been set out in detail, we are working within these spending programmes and therefore we will be able to afford what we have set out right through to 2008."

The shadow Chancellor, George Osborne, said in the Commons: "The Chancellor's refusal to rule out tax rises will cast a shadow over millions of hardworking families who will pay for Gordon Brown's excessive borrowing and unreformed spending. As Mr Brown's reputation continues to unravel it is clear this 20th century chancellor is running out of ideas for the 21st century."

He told Mr Brown: "For months you stubbornly stuck to those growth forecasts when everyone was telling you you were wrong. Productivity growth has slumped. Business investment is at a record low and the economy is growing slower than the average for other developed economies in the world. Could you tell us when you knew you had got it all wrong?"

"You've got it wrong," Mr Brown replied. "The British economy is growing faster than Germany, France, the Netherlands, Italy and faster than the EU. Higher oil prices have caused the difficulties all economies face." Vince Cable, Treasury spokesman for the Liberal Democrats, accused Mr Brown of trying to hide behind the oil price rise even though independent analysis had shown it had caused that less than a quarter of the economic slowdown.

"The vast majority of the problem is home grown due to weakness in private investment and nervousness among private consumers about their large levels of personal debt and the possibility of a bursting of the housing bubble," he said.

Mr Brown replied: "If the problem was as home grown as you suggest, why is it that Germany, France, Italy and the Netherlands are all growing slower than us?" He added: "In no other decade would a trebling of oil prices in the British economy have led to anything other than a recession, but this decade." He insisted the OECD report had praised Britain as "the most stable economy of the G7" and a "paragon of stability".