Brown to use benefit savings to cut deficit

Some of the savings generated by Labour's programme to get 250,000 young unemployed people into work would be used to cut the budget deficit, Gordon Brown said yesterday.

The shadow Chancellor's statement will surprise some of his frontbench colleagues, who had been expecting that the dividend would be used, instead, to increase spending on education, health and welfare programmes.

That was not being ruled out completely last night, but Mr Brown made clear in a BBC On the Record interview that some of the money saved from social security would be used to cut public borrowing.

Mr Brown said that current Treasury projections showed a "black hole" Tory deficit of pounds 26bn this year, and pounds 19bn next year. "The pounds 26bn is big indeed," he said, "and the reason that we have made these tough decisions about public spending is because we recognise that we have got to get the deficit down." He said that would be achieved by renouncing recent "reckless" Conservative commitments, like the pounds 60m for a royal yacht.

But when he was pressed to say how the budget deficit would be cut, Mr Brown said: "What we want to do, of course, and that's why we have this big welfare to work programme, is to cut the spending on social security. We are reducing the deficit by tackling unemployment and high social security bills. We're also helping the reduction of the deficit by not making these extraordinary spending commitments the Tories have made."

Labour yesterday confirmed that it would be producing a separate "business manifesto", which would, among other things, say: "We will ask, about public spending, the questions any manager in a company would ask: not how much more there is to spend, but how to spend existing resources more efficiently to meet our priorities. Ministers will be asked to save before they spend."

Party sources said that parts of the manifesto had been drafted in co- operation with the Confederation of British Industry. Robin Cook, Labour's policy co-ordinator, will give more detail on co-operation with business in a speech in London tomorrow.

Mr Brown said yesterday that the CBI would be a key player in a business and government working party that would be set up during Britain's six- month presidency of the European Union, starting in January.

"I think this is a very important development because it shows that business and government can work together, both in Britain and Europe to achieve common aims," he told On the Record. "And we're getting away from this old idea that public has got to say one thing, private has got to say another and there's never any proper relationship between them."

The business manifesto will say: "We have consistently proposed a number of areas, including energy, telecommunications and financial services, where Europe needs to open markets further in order to make the single market a reality and increase flexibility, productivity and employment.

"We will establish, in government, a British presidency working group, consisting of government ministers and business representatives, including the CBI, to discuss themes and policy initiatives in preparation for the UK's presidency of the European Union in 1998."