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UPDATE 1-Britain's Brown says tax cuts could help economy

Published 11/10/2008, 06:03 AM
Updated 11/10/2008, 06:04 AM

(Adds background, detail, Osborne quotes)

LONDON, Nov 10 (Reuters) - British Prime Minister Gordon Brown said on Monday that tax cuts could be used to help stimulate the British economy and it was a measure the government would be considering in the next few weeks.

"We will look at everything but that's a matter for the budget and the pre-budget report," he told Good Morning Television when asked about possible fiscal moves to help Britain out of an expected recession in the coming year.

"What I am determined to do is to get all countries around the world ... to get their economies moving again and one way you can do that is by putting more money into the economy by tax cuts or by public spending rises, but that is something that we have got to look at in the next few weeks," he added.

The pre-budget report is expected this month and could come as early as next week.

Brown's comments were the latest in a series from him and his finance minister, Alistair Darling, repeatedly stressing the importance of boosting the economy, which shrank in the third quarter of 2008 for the first time in 16 years and is expected to contract more sharply next year.

The Bank of England delivered a shock 1.5 percentage point cut in interest rates late week, taking borrowing costs to 3.0 percent, and Brown said on Friday that fiscal policy could be used in tandem with monetary policy to support economic growth -- a comment which has been seen as a hint at possible tax cuts.

Brown and other leaders meet in Washington next weekend to discuss longer term solutions for dealing with the economic downturn and analysts say he is keen to encourage coordinated fiscal action to run alongside a series of coordinated moves on interest rates and on bank recapitalisation.

Writing in the Financial Times, opposition Conservative Treasury spokesman George Osborne said tax cuts could help, but only if they were part of an overall plan and "properly funded".

He said monetary policy remained "the principal tool for stimulating demand", adding that central banks must be given room to deliver coordinated "sustained and substantial" interest rate cuts if needed.

"Spending our way out of recession will not work. Targeted tax cuts would help, but they must be properly funded," Osborne wrote. (Reporting by Kate Kelland and Frank Prenesti; editing by Tony Austin)

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