Darling could hold pre-election review 'to level' with voters

The Government could still hold a review of public spending before going to the country in a general election, Chancellor Alistair Darling indicated today.

In an interview with The Daily Telegraph, he said the Government would have to tell people "the lie of the land" when it came to the public finances.

His comments will be seen as a rebuff to Lord Mandelson, the business secretary and first secretary of state, who suggested recently that plans for a government department-by-department spending review had been abandoned ahead of the election.

Prime Minister Gordon Brown also warned that it would be a mistake for the Government to try to set departmental budgets for up to three years ahead at a time when economic outlook was so uncertain.

But with whichever party wins the next election expected to have to make deep cuts in order to rebuild the public finances in the wake of the recession, Mr Darling said it was important to "try to level with people".

"I'm very clear that we do have to tell people the lie of the land. People will understand there are uncertainties but we do have to set out our stall. Public spending will be tighter than it has been in the past," he said.

"People will need to know where we stand and what judgments we are likely to make if we are faced with difficult situations."

According to the Telegraph, the options being considered by the chancellor include a full, three-year, comprehensive spending review, or a streamlined version which would focus on a few key departments such as health and education.

Mr Darling also raised the possibility that he could reverse next year's planned increase in the higher rate of tax to 50p on incomes above £150,000.

"The increase in the top rate is not something I would have wanted to do. Certainly in future I would like to be able to reduce tax," he said.