Brown attacked over '£50bn shortfall'

BRITAIN faces a borrowing bombshell in the next Parliament, according to an analysis of Gordon Brown's Pre-Budget Report prepared for the Tories.

The study suggests that the Government will need to raise taxes or cut spending by £50bn to stay within the Treasury's fiscal rules in the years ahead.

Separate forecasts from the Cebr - an economics think-tank - lend weight to the claims from the Tories.

The Cebr reckons that the Chancellor will have to slash spending or raise income tax by 3.5p to balance his books.

Even using Brown's definition of the economic cycle as running from 1999/2000 to 2006/7, the Cebr reckons the current account will be £15.4bn in the red.

The Chancellor's fiscal policy is already under fire from the International Monetary Fund which claims that next year's borrowing could be £10bn higher than the £31bn estimated by the Treasury in the Pre-Budget Report.

The Conservatives' analysis has projected forward the spending and tax assumptions in the Pre-Budget Report to conclude that there will be a budget shortfall of £50bn in 2006-07 and 2008-09.

The Tories claim that if National Health Service spending continues at the pace established by the Wanless Report and other items were to grow at the average annual rate specified for the next two years, Government costs would overshoot by £26bn in 2006-2009. They also see a £28bn budget shortfall from lower tax receipts.

The two factors would almost certainly mean that the Government would breach its 'golden rule' - which allows borrowing only for investment over the economic cycle - during the next Parliament.

Shadow Chancellor Oliver Letwin said: 'Labour cannot go on increasing spending at the current rate into the next Parliament without adding large amounts to the tax burden.'