PM calls for world-wide tax cuts

(AP)

Tax cuts and spending rises must be co-ordinated internationally if they are to drag the world out of its economic crisis, Gordon Brown insisted today.

Speaking ahead of a crunch summit of global leaders in Washington this weekend, the Prime Minister said countries would achieve far less benefit if they acted alone.

Mr Brown also called for a world trade deal to be struck "over the coming days" as part of moves to tackle the downturn.

The premier told his regular Downing Street press conference: "The most important thing I'm saying today is if we have a fiscal stimulus in Britain and it is not repeated in other countries then it will have far less effect and far less benefit than if it were done in every other major economy around the world."

He went on: "One initiative here and there is not going to make the difference.

"What you need is a co-ordinated strategy and preferably a co-ordinated strategy across the world and not just in one country."

Mr Brown has hinted strongly that Chancellor Alistair Darling will unveil tax cuts alongside higher spending in the forthcoming Pre Budget Report.

Other major nations including China and the US have already announced multi-billion pound packages intended to stimulate their economies.

The premier explicitly admitted today that any measures the Government brings forward will be "unfunded" and require significant extra borrowing.

"You have to take action that is initially unfunded," he said. "That is the idea of a fiscal stimulus."

He then went on to attack the Tories for claiming their £2.5bn tax break scheme unveiled today was self-funding when in fact it was not.

The PM said David Cameron's approach was "confused", and questioned whether excusing firms £2,500 in national insurance contributions when they took on medium-term unemployed would actually create jobs.

Setting out his vision for co-ordinated action to combat the global slowdown, Mr Brown said the G20 must avoid a repeat of the failure of the 1933 world economic conference in London, which ushered in an era of protectionism.

Only "small differences" were now preventing a deal on liberalising world trade being concluded, he insisted. The Doha round of negotiations have been stalled since the summer, following rows between developed and developing nations over agricultural import rules.

"If over the coming days countries can resolve what I now regard as small differences it would send a huge signal to the whole world that the answer to 2008's crisis is not the beggar thy neighbour protectionate of past crises, but stimulating a world trade agreement," Mr Brown said.

Domestically, Mr Brown said the Government would be working with banks to ensure individuals and small businesses had access to finance.

He also called for a "new responsible approach" to lending by credit and store card companies, which will be underpinned by a new set of rules.

Mr Brown signalled that protection for homeowners struggling financially would be tightened up.

He said it was "not acceptable" that lenders were still able, in certain circumstances, to repossess the homes of people who defaulted on their mortgage payments without a court order.

"We said very clearly that there were rules and procedures that courts would go through before anybody is repossessed and we are looking at the moment how we can do even more in a more rigorous way to ensure that homeowners are protected."

He added: "My first priority is ensuring there is real help in tough times for hard-pressed families, mortgage holders and businesses."