Don't cut taxes, unions tell Brown

Gordon Brown will be urged by the TUC and the CBI this week not to hand out pre-election tax cuts of £16bn in his pre-Budget statement.

Gordon Brown will be urged by the TUC and the CBI this week not to hand out pre-election tax cuts of £16bn in his pre-Budget statement.

In a rare show of unity, John Monks, the TUC general secretary, and Digby Jones, the director general of the CBI, will warn the Chancellor against any inflationary move on the economy that could lead to higher interest rates and jobs being put at risk.

Downing Street and the Treasury are alarmed at reports that Mr Brown has a £16bn surplus to pump in to the economy, and are keen to damp down speculation of a pre-election spending spree.

On GMTV today, Mr Monks will call for higher state pensions and a cut in fuel duties to be given priority.

Speaking to the Independent on Sunday, Mr Monks said last night: "We are convinced of the virtues of a fairly stable economic outlook. [Mr Brown] should not take too many risks with the economy. He could afford to do something for the pensioners. We are looking for a good rise in the state pension."

Mr Monks said the TUC was still arguing for restoration of the earnings link with pensions, a vote on which Tony Blair and the Chancellor, who want to resist it, were defeated at Labour's annual conference. But it is expected that, in April - probably the month before Britain goes to the polls - Mr Brown will give pensioners increases of up to £15 a week.

The TUC is also pressing Mr Brown to give more to the trade and industry department to help manufacturers, who, of late, have been hit by the strong pound, which has raised the price of UK exports. "We have seen other countries in the European Union using imaginative ways to help their manufacturing industries," said Mr Monks. The TUC leader said that after meeting the Chancellor recently he hoped for progress on the fuel situation. "We don't want to buy off the protesters who held the country to ransom, but we do think he might be able to do something on petrol prices."

This week, the CBI's director general will also urge the Chancellor not to spend more than £3bn of his surplus on the economy. Mr Jones told the IoS that he would call on Mr Brown to target tax cuts at business so as to stimulate investment and prompt measures to raise Britain's poor productivity figures to those of competitors such as the United States.

"We think the macro-economic stability is very satisfactory. We would like no more than £3bn added to the economy, and we would like that targeted at business," Mr Jones said, adding that the CBIwould like to feel that interest rates had peaked and that after seven or eight months of stability they would move downward. "Nothing he does should damage the economic prospects."

Mr Jones said that the Bank of England's monetary policy committee should not have any "concern with regard to raising interest rates". He added: "[Mr Brown] should be putting money back into the economy by way of reduction in taxation which should be targeted at business. Business has had £5bn a year taken out in tax for the past three years."