Chancellor refuses to rule out post-election tax rises

Gordon Brown spurned four opportunities to rule out a tax rises after the next general election yesterday as he defended his Budget plans for spending and borrowing in front of MPs.

Gordon Brown spurned four opportunities to rule out a tax rises after the next general election yesterday as he defended his Budget plans for spending and borrowing in front of MPs.

He told the Treasury select committee the Government's multibillion-pound spending plans were "affordable and fully financed" up to 2008. He also brushed aside worries that Britain's red-hot housing market could suffer a crash that would hit the rest of the economy, saying it was in a more robust state than before the 1990s property slump.

Leading independent economists told the committee on Tuesday that the Government would be forced to raise tax by £10bn a year to avoid breaking its golden rule to borrow only to invest.

At yesterday's hearing, the Chancellor was repeatedly challenged by Michael Fallon, a Conservative committee member, to rule that out explicitly. The Chancellor retorted that in his Budget he had the choice of using the extra money from strong economic growth for tax cuts or improvements to public services. "Every commitment we made is affordable and fully financed" he said. "If I were a short-termist chancellor I could have said we could afford short-term tax cuts but I chose to use the money for the long-term."

He also defended his growth forecasts, saying the commentators who predicted the Government would miss its target of GDP growth of between 2.0 and 2.5 per cent last year had been proved wrong. He said the economy would rebalance in the next three years as manufacturing output and business investment accelerated and house prices inflation "moderated".

When questioned over some forecasters' gloomy outlook for house prices, he said: "It is not true that the economy is in a parlous position... over this."

He said typical debt service payments among consumers comprised about 7 per cent of disposable income compared with 15 per cent in the late 1980s. Mortgage payments made up only 15 per cent of income compared with 30 per cent then. "As the housing price (growth) moderates and at the same time consumer economic growth moderates, the economy will become more balanced over the course of the year," Mr Brown added.