Tax cut plans not a gamble, says PM

Chancellor Alistair Darling will deliver the Government's crucial financial statement in the Commons and is set to deliver a "fiscal stimulus" package in an effort to kick-start the economy, with a cut in VAT likely to form the centrepiece of his plans.

Mr Brown said the measures announced would need to be "substantial" to have an impact on the downturn affecting the UK. He told BBC1's The Politics Show world leaders agreed the need for an injection of cash into the economy.

"Everybody generally agrees that the fiscal stimulus - and what we mean by fiscal stimulus is real help for businesses and families now - has got to be substantial to have an impact."

The Government is expected to pump between £15 and £20 billion into the economy in a Keynesian-style bid to spend Britain out of the downturn.

As well as the VAT change from 17.5% to 15%, which would cost £12.5 billion, moves are thought to include further tax cuts targeted at the least well off. Other options include postponing the introduction of increased vehicle excise duty for older vehicles and taxpayer-funded guarantees on loans to small businesses.

There are also suggestions of a new three month grace period for mortgage holders struggling to keep up with their repayments before repossession proceedings kick in. Further efficiency savings in the public sector will be announced, allowing some expenditure to be used more constructively to fight the recession.

But debt is predicted to soar to more than £120 billion, fuelling concerns about the tax rises and spending cuts that may be necessary later. Mr Brown said: "I don't see this as a gamble. I see this as necessary, responsible action that any sensible government would want to take."

The Government's plan to increase borrowing to finance its package has been heavily criticised by Tory leader David Cameron, who claims it will lead to a "tax bombshell" in the long-term as money is clawed back to repay the debt.

But Mr Brown said: "Those people who say do nothing now would leave people, as in the 80s and the 90s, without hope that their mortgage problems could be sorted out, or their jobs problems could be sorted out. It would be lacking in compassion as well as irresponsible, in my view."