Brown planning pre-Christmas tax 'giveaway' for Britain's poorest families » Central Government » 24dash.com

Gordon Brown is preparing a multi-billion pound pre-Christmas tax giveaway in a bid to revive the UK's ailing economy.

Downing Street sources indicated that cuts would be targeted at low-income families, probably through the tax credit and winter fuel payment systems.

Along with bringing forward and increasing spending, the "fiscal stimulus" package could be worth between £15 billion and £30 billion - largely funded through extra state borrowing.

Depending on how much was directed towards lowering taxes, that means the average family's bill could be slashed by up to £1,000.

But the Tories launched a furious attack on the principle behind the plans today, insisting the Prime Minister was trying to "max out the credit card" at the expense of future generations.

Shadow chancellor George Osborne ruled out either proposing "unfunded" tax cuts, or supporting the Government's package - due to be unveiled in the Pre-Budget report next week.

"We are warning the country that Gordon Brown is abandoning fiscal responsibility and when a government does that it stacks up debt for future generations and stacks up tax rises for future generations as well," he told BBC One's Andrew Marr show.

"The choice in British politics is going to be funded tax cuts from the Conservative Party, and a tax con by the Labour Party that has abandoned 15 years of rhetoric on fiscal stability."

The comments risked infuriating Conservative right-wingers, some of whom support the idea of upfront tax cuts and find themselves arguably more aligned with Labour than their own leadership.

Mr Osborne also questioned Mr Brown's assertion that the G20 had accepted his call for co-ordinated cash injections and tax cuts in order to kickstart growth.

The premier said the gathering in Washington had made an "historic" pact to work together on fiscal measures, and insisted countries would be bringing forward their own plans over the coming weeks.

But Mr Osborne claimed the final communique from leaders indicated otherwise. "It is three and a half thousands words long, has 21 words on fiscal stimulus, and says it should be done where appropriate and providing it is consistent with fiscal sustainability," he said.

"Gordon Brown told us before going to Washington that it was all about getting a global agreement for a fiscal stimulus package. He has not done that."

As the differences between the two main parties on how to tackle the economic downturn deepened, Chancellor Alistair Darling accused Mr Osborne and David Cameron of lacking "judgment".

"When you are in an economic situation like this it is right to do everything you can to help people get through a difficult period but it is also right that you do things that will help the country as whole get through it more quickly than otherwise," he told BBC One's Politics Show.

Mr Darling refused to be drawn on the nature or scope of any fiscal measures in the PBR.

"But it is the case that if this is going to work here or anywhere else you need to do something decisively and you need to do it quickly so that it has an effect as quickly as you possibly can," he added. "The key thing is that you are ready to take the action and that you don't take the Tory view that you just leave people to get on with it."

The head of the IMF, Dominique Strauss-Kahn, gave strong backing to fiscal stimulus plans at the summit, suggesting that the value of each country's package should be around 2% of GDP. In the UK, that would be equivalent to around £30bn, but Government sources have indicated the figure is likely to be closer to £15bn.

"What we need is more than 1%, we certainly need at least 2%, and some of the heads of government were arguing even that we need more than 2%," Mr Strauss-Khan said. "But, you know, in the IMF we are very conservative so 2% seems to me to be the right target."

China, Japan, Germany and Australia are among the countries which have already announced stimulus packages.

Mr Brown also said his thinking was "very much in line" with that of US president-elect Barack Obama - even though he did not take part in the Washington summit.

The talks did not hammer out details of mooted reforms to the world financial system, including global regulation of the biggest banks and an overhaul of the way the International Monetary Fund (IMF) operates.

That is expected to happen at a further G20 meeting next spring, which could be held in London.

Business Secretary Lord Mandelson said any re-adjustments to take account of higher borrowing now would only occur after Britain has emerged from recession.

"You are talking about the immediate term when taxes may be cut alongside spending maintained, if not increased in certain key areas of government activity, on the one hand, and a medium term adjustment some years ahead," he told BBC Radio 4's Today programme.

"What we need to do if tax cuts are going to be included in the Pre-Budget Report next Monday - and I'm not going to anticipate what measures the Chancellor will introduce - they have to be targeted at segments of the population who are likely to increase their spending."

Challenged that Labour was storing up difficulties for a future administration, Lord Mandelson said the Government had to concentrate on what the economy needed now.

"If you take action now to expand borrowing you know you will have to make structural adjustment later on, but that is later on when we are through this recession as we will get through."

Lord Mandelson insisted the Washington summit's agreement on a 3,000-word communique was "remarkable".

Lord Mandelson told BBC Breakfast that banks were "over-reacting" to the shock of the credit crunch and allowing "fear" to influence too many of their local decisions.

"We are doing everything we can to deal with what I think is an over-reaction on their (the banks) part. There is too much fear driving local decisions."

"We know that the banks have received an almighty great shock and it has rocked them back. We have done our best to stabilise these banks. They must not allow fear and over-reaction to set in."

He added that he met with banks and SMEs (Small Medium Enterprises) to discuss the difficulties in the credit sector.

"There is a lot of fear, some of which is groundless."