Embattled Brown puts big-spending Budget on hold

Speaking in New York the Prime Minister stressed that monetary policy and interest rates were just as important as tax cuts or higher spending.

"It is the combination of all these things that makes a difference," he said. His comment came a day after Bank of England governor Mervyn King broke ranks with No10 by issuing a public warning against another increase in borrowing to spend the way out of recession.

Although Downing Street denied there was any split with the Bank over finance policy, the gap between them was laid bare this afternoon when Commons leader Harriet Harman, standing in at Prime Minister's Questions, refused three times to endorse Mr King's remarks.

Liberal Democrat deputy leader Vince Cable jeered that the Governor had staged "a very British coup d'etat". For the Tories, William Hague said Mr Brown had "lost control of both the public finances and public policy".

Asked directly about the reported split during his New York appearance, Mr Brown glossed over the divide but emphasised that Mr King would "do what's necessary" to beat the recession.

"What the issue is actually now, is whether we are prepared, given what happens over the next few months, to do what's necessary to resume growth in the economy.

"And I think if you put that question to Mervyn King he will say - as he said when he signed the G20 communique - we have got to take the action necessary to restore growth."

At the same time, Mr Brown sharply downplayed expectations of a global agreement being signed at next week's G20 summit in London on tax and spend measures to stimulate the economies of the world.

Foreign leaders have warned No10 that they have already passed their national budgets for the year and it is too late to rewrite them for the G20, prompting fears that the summit will be seen as a failure.

"Every country will have its own timing for announcing fiscal and monetary decisions," said Mr Brown. "Nobody is trying to upset that timing."

A split between Barack Obama and European leaders has opened ahead of the summit, with the US President appearing angry that other EU countries seem happy to let America spend billions on boosting the economy, while they just ride on its coat tails.

"All of us are going to have to take steps in order to lift the economy," President Obama said in a televised press conference last night.

"We don't want a situation in which some countries are making extraordinary efforts and other countries aren't with the hope that somehow the countries that are making those important steps lift everybody up."

Mr Brown is on the second leg of a 17,500-mile tour to drum up support for the summit.

He will later have talks with UN Secretary General Ban Ki-Moon before travelling to Brazil and Chile.