World financial news

Prime Minister Gordon Brown will say a Conservative Party plan to squeeze public spending and contain inflation risks putting the British economy through a decade of austerity.

Brown will reiterate to a panel of economists in London tomorrow the government’s commitment to halve the budget deficit within four years, with tax increases of about 14 billion pounds ($22 billion), asset sales of 3 billion pounds and cuts in spending that will begin to bite as soon as next year, according to remarks released by his office.

The comments mark an attempt by Brown to regain credibility with voters ahead of an election that must be held before June. Brown will say Conservative leader David Cameron is out of step with an international consensus on how to deal with the crisis and say his policies risk prolonging the slump, Britain’s worst since World War II. Cameron wants to go further and faster in tackling the shortfall.

“We need a deficit reduction plan that supports jobs and growth not one that snuffs out recovery before it has started,” Brown will say. “Restoring public finance sustainability must be done in a way that that supports growth not destroys it. The failure to do so is the real risk of a decade of austerity.”

Brown has trailed Cameron in every poll for the last two years. The latest, an ICM Ltd. poll in the News of the World showed the Conservatives up 5 percentage points on 45 percent, and Labour unchanged on 26 percent. Meanwhile a BPIX poll in the Mail on Sunday put The Conservatives on 43 percent and Labour on 29 percent.

Monetary Policy

Brown’s comments also extend to monetary policy where he will say that he will reject an early end to the Bank of England’s money printing program a month before the central bank decides on whether it needs to be extended payday loan company. Cameron last week said the central bank’s plan, know as quantitative easing, will have to stop “sometime soon” to prevent inflation spiraling.

The Treasury has authorized the central bank to buy 175 billion pounds ($278 billion) of securities with newly created money, aiming to rebuild bank balance sheets and stimulate the economy.

Bank governor Mervyn King will use new forecasts next month to appraise the plan, which prompted a split on the committee in August when King favored spending even more. Former Deputy Governor John Gieve said in an Oct. 6 interview that officials may consider an expansion in November because they will be wary of a “false dawn” for the economy.

Budget Deficit

Brown will reaffirm the U.K.’s plan to helve the budget deficit, which at 175 billion pounds next year will top 12 percent of national income, the most in the Group of 20 nations. He will point to studies by the International Monetary Fund that say that extra growth of 1 percent each year for a decade can reduce national debt almost by a third.

Aside from higher taxes and cuts in spending, Brown will say the government will sell off assets to reduce debt, confirming an announcement in the annual budget in March that the government will consider disposals of about 16 billion pounds.

Brown will say tomorrow that Tote, the student loan book, the Dartford Crossing over the river Thames, the government’s stake in the Channel Tunnel and in Urenco Group, the uranium enricher, will raise about 3 billion pounds.

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