Brown 'to change rules over borrowing'

The Government may relax Gordon Brown's fiscal rules to allow it to increase borrowing during the economic downturn, it emerged last night.

Opposition parties claimed that Mr Brown had "lost control" of the economy after reports emerged that the Treasury will rewrite his fiscal rules so it would not have to break the borrowing limit of 40 per cent of national income.

They were laid down by Mr Brown as Chancellor when Labour came to power in 1997. The rules are likely to be breached because government revenues are lower than expected as the economy slows. An analysis for The Independent last week predicted a £7.5bn shortfall.

Vince Cable, the Treasury spokesman for the Liberal Democrats, said fiscal policy should be put in the hands of an independent body, like interest rates have been with the Bank of England, to stop the Government "fiddling" the figures. "The fiscal rules have no credibility when the Government keeps fiddling or changing them," he said.

"This step underlines what I and my colleagues have said for years, the assessment of fiscal policy must be made by an independent body in the same way interest rates are determined. It's completely lacking credibility for the Treasury to be marking its own exam papers and setting its own questions. What we need is an Ofsted for the economy."

A Conservative Party spokesman said: "If this is true, it puts the final nail in the coffin of Gordon Brown's reputation for economic competence. He repeatedly staked that reputation on his fiscal rules, and now we're told that the Treasury is having to rewrite the rules because the Government has lost control of the public finances."

A Treasury spokesman said a story in today's Financial Times was "pure speculation".