Mandelson: Tax and spend will end fear over economy

The Business Secretary confirmed that the pre-Budget report will be dominated by a "much-needed stimulus" designed to ease the recession.

Lord Mandelson said: "The next thing we have to do is defeat fear. Fear among consumers that's depressing demand, fear amongst banks that is inhibiting them from spending, fear amongst small and medium-sized enterprises that banks are just about to cut off their credit lines. A stimulus will counter those fears."

The pre-Budget report is expected to include instant tax cuts worth hundreds of pounds for the poorest households to put money in people's pockets for Christmas.

Billions of pounds worth of capital spending programmes are also likely to be accelerated to boost construction industries, and money underspent by Whitehall departments reallocated.

Lord Mandelson's comments echoed the US President Franklin D Roosevelt's inaugural speech that urged: "The only thing we have to fear is fear itself."

The Business Secretary added: The Government's job is to make the recession as short and as painless as possible."

Chancellor Alistair Darling is resisting pressure from Gordon Brown over the giveaway in next week's mini-budget, sources have confirmed to the Standard.

Although the pair agree on the need for a stimulus, he is demanding a lower overall figure to keep borrowing down.

The political ground for a spree was paved at the weekend when the G20 group of world leaders agreed on the need to boost global economies.

It was strengthened further when the head of the IMF, Dominique Strauss-Kahn, suggested each country's package should be worth around two per cent of GDP - in the UK around £30 billion. Government sources quickly indicated it was likely to be closer to £15 billion.

The Tories accused the Prime Minister of trying to "max out the credit card" by spending at the expense of future generations.

Shadow chancellor George Osborne said "unfunded" tax cuts, not matched by cuts in spending, were a "con".