Darling tight-lipped on £2.7bn future

Mr Darling could face a tough time at the hands of the committee
Mr Darling could face a tough time at the hands of the committee

Alistair Darling says MPs will have to wait until this autumn before finding out whether the £2.7 billion stimulus package will be repeated in 2009.

The chancellor announced the package, which increased the personal allowance of basic rate taxpayers by £600, last month.

He had been forced to back down over the need for compensation following the abolition of the 10p income tax rate. Rather than opting to compensate only those left worse off - around one million people - he helped an estimated 13 million further people through the move.

Facing a grilling from MPs on the Treasury select committee this afternoon, the chancellor sought to explain how he brought the stimulus forward in response to pressure to act this year.

"I decided that the best way of financing this particular proposal was through borrowing this year because I could accommodate that within the fiscal rules," he explained.

"I wanted to do something this financial year to help people who have lost out."

Michael Fallon, the Conservative MP for Sevenoaks, pressed Mr Darling on whether he accepted the additional 13 million would lose out if the £2.7 billion package was not repeated next year.

The chancellor said he refused to "box myself in" and said he would "decide what is appropriate" in the autumn.

"I know where you're going, Mr Fallon, and I'm not going down that road. you will just have to wait for the pre-Budget report," he added.

MPs confronted Mr Darling over a report from the Organisation for Economic Cooperation and Development published today, which warns the package puts the government's fiscal rules on public borrowing at risk.

There is concern the Treasury's predictions for GDP growth, which it says could be as high as 2.25 per cent in 2008, may be optimistic - further undermining the government's reputation for stable fiscal management.

Mr Darling rejected the suggestion that the rules are under threat, insisting borrowing the money was "the right way to do this".

"I believe I can. [implement the package] within the fiscal rules," he said.

"I don't accept that we're putting the rules at risk. I think the rules do provide a very good discipline on us and I believe that what I've done we can't afford. It was necessary because it was a particular problem that needed sorting out."

Reflecting Gordon Brown's decision to tie his political fate to the economy, Mr Darling said the OECD report also noted the "resilience" of the British economy to the "turbulent international climate".

"If you look over the last ten years you see we have an extremely stable economy," he said, adding the OECD's conclusion is a "tribute to our management".


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