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FORMER paymaster general Geoffrey Robinson today predicted that Monday's pre-Budget report would mark a widening of the "clear blue water" between the two parties, as the differences over their approach to the financial crisis grow starker.
Mr Robinson, an informal economic adviser to Gordon Brown, said that the divide over a borrowing increase to alleviate the downturn would have "dramatic consequences in the future".
"These are the terms on which the country will judge us," he said. "When it comes to an election, that choice is going to be there. It will be the dominant issue."
Mr Robinson's comments come as other senior Labour sources confirmed that Mr Brown is now considering an election in the first half of next year. He predicted that the downturn would be a "deep and difficult recession", adding: "I am not one of those people who says that it will be short and sharp. I think it will still be the background to the next election whenever it comes."
As Labour ramped up its attack on the Tories' decision to drop a pledge to match government spending, Mr Robinson said that the Conservative leader had made a "catastrophic error" in not backing the Government's fiscal stimulus - and claimed he had caved in to the Right of his party.
He said he expected the degree of the fiscal stimulus to be "between one and 1.5 per cent of GDP" - roughly £15billion to £22.5billion
But he conceded that "borrowing will rise dramatically" next week to pay for a targeted tax cut. "There will be a substantial increase. The only way to get it down is by an increase in growth; we have to get back to that."
Asked whether the Government would have to implement tax rises in the future to pay for the stimulus package now, Mr Robinson replied: "We do have some questions to answer on that. But the consequences of not doing what we are doing would be much worse for the economy.
"There is no better way out of this than fiscal stimulus - the Germans have just pumped well over a billion euro in credit into their car industry. America will come forward with a big package. People are intervening on a massive scale to support their industries. This has to be a concerted international effort or it won't work."
With David Cameron warning of a 1992-style "Labour tax bombshell", ministers have been warned by Number10 not to concede that tax rises are inevitable until after next Monday's statement on the economy.
The Prime Minister is under strong pressure from his own backbenchers to persuade the banks bailed out by public funds to lend again and Mr Robinson indicated that new moves are likely in the emergency-Budget next week. "I think we will see something substantial on that. There are other steps you can take."
Asked if he foresaw additional measures making it more difficult for banks to foreclose on mortgages, he replied: "Yes, I think something like that would be good. We can't forget the human cost of what is happening."
But he slapped down the Liberal Democrat leader Nick Clegg and Labour critics who have called for a tougher line against the banks.
"There is really no point in us getting into a punitive relationship with the banks when we will be working alongside them to try to get back to healthy lending."
He also suggested that an expansion of rented social housing might be on the way to alleviate pressure on housing costs for lower earners. "I think this might end up as part of an overhaul package. We could certainly bring forward some spending on that. It would be much better than a billion spent digging holes in the road."
Reader views (4)
"Ex-minister: Best way out of crisis is to pump in cash"- perhaps, but NuLiebour should have thought of that before they spent it all. It's a bit late now.
- Keith Lonsdale, Doncaster
Looks and sounds like New Labour are in panic mode.They desperately want the Tories to agree with what they are doing,so when things turn into a bigger mess they can say that the Tories would have done just the same.As for Robinson, isn`t he another disgraced Labour MP!
- Mark A, london england
No - Robert. Mr Brown knows what medicine is required at this difficult time of global economic crisis. It is to the detriment of the Tory Party that they have rescinded on their promise to support the Government line. This turnaround has caused their opinion poll ratings to fall dramatically
- Keith Price, Luton, England
It just shows how myopic Nu-Labour's policies really are. All they are doing currently is overloading the lifeboats as the good ship "Titanic" flounders in a sea of indebtedness.
- Robert El-Cid,, Hull, East Yorks.,
