Darling defends £1 trillion gamble

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Mr Darling said it would have been wrong to walk away and leave people to "sink or swim" as he faced questioning over Monday's pre-budget report designed to kick-start the struggling economy with a £20 billion boost.

"It seems only the Conservatives who are saying, as they did in the 1980s and the 1990s, 'just walk away from people, leave them high and dry, let them sink or swim'," he told GMTV.

"I just do not think that is right thing to do. People expect the Government to help them. We will be helping people and I fully intend to see that through," he said on GMTV.

In a pre-budget report that surprised many with its scope, Mr Darling announced plans to cut VAT, boost tax allowances, and offer more cash to parents and pensioners.

But the "fiscal stimulus" will come with a sizeable price tag. Mr Darling admitted that state borrowing would hit £78 billion this year and £118 billion next year, while total national debt will top £1 trillion by 2012-13.

Shadow Chancellor George Osborne said that the best way to stimulate the economy was through "radical" cuts in interest rates.

"We have got to get lending going in this economy again, you have got to get credit to small businesses, that is where the action is needed, not, frankly, taking a huge risk with the public finances," he told the BBC Radio 4 Today programme.

The Governor of the Bank of England backed the Government's £20 billion gamble to drag the UK out of recession. Mervyn King said the measures outlined in the Pre-Budget Report seemed "perfectly reasonable" given the "extraordinary circumstances".

But, giving evidence to the Treasury Select Committee, Mr King also warned there was a "long hard road ahead" to restore stability to the economy. Mr King said Chancellor Alastair Darling's cut in VAT meant it was now "very likely" that the UK would suffer negative inflation next year - but predicted the country would avoid a negative spiral of deflation.