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Mandelson moves on budget deficit Budget plans 'tough' - Mandelson
(about 23 hours later)
Business Secretary Lord Mandelson will later try to reassure the markets the government is not divided over how to cut the UK's £178bn budget deficit. The chancellor's pre-Budget report was "bold and tough" in its objective to cut the UK's £178bn budget deficit, Lord Mandelson has said.
Lord Mandelson will say in a speech the government recognises there are limits to how high taxes can go. The business secretary said in a speech the PBR was "far more credible ... than some of the British press and our political opponents like to pretend".
Spending reductions, tax increases and economic growth are all vital to reducing the deficit, he will add. It follows reports that he was privately unhappy that the PBR did not include more detailed plans for cuts.
It comes as the Conservatives have warned UK economic credibility is being questioned around the world. Meanwhile the Tories say UK economic credibility is under question.
BBC political editor Nick Robinson says that for the business secretary to declare he backs government policy would not normally be a news story. One month after the PBR, Lord Mandelson told journalists it had been "first rate" and its analysis and policies "absolutely dead right".
'Always vigilant' Asked why he had not commented on it earlier he said he would make no apologies for going on a trade visit to India and taking a Christmas break.
But for weeks Lord Mandelson has remained uncharacteristically silent in public while privately expressing deep frustration at Gordon Brown's approach to tackling the budget deficit. 'Best antidote'
He has been concerned that the prime minister's failure to spell out the need for public spending cuts has reduced the government's credibility, says our correspondent. In his speech to the Work Foundation in London, Lord Mandelson said reducing the deficit would require spending reductions, tax increases and economic growth.
Now Lord Mandelson will insist the government's plans are far more credible than they are given credit for. But he said fostering growth was "the best antidote to debt, both in the short and long term".
He will stress the government will "always be vigilant" so that the tax burden on businesses and the highest earners "does not become so great that it damages our long-term competitiveness". "December's PBR is far more credible in all these respects than some of the British press and our political opponents like to pretend," he said.
Lord Mandelson will urge his party to focus on the "politics of production" - wealth creation - not the "politics of distribution". "It has a clear objective, to halve the deficit by 2013-14. It is bold and tough, the equivalent of something approaching an £80bn turnaround in the public finances.
This government is to fiscal responsibility what Tiger Woods is to marital fidelity David Gauke MP "This is the sharpest reduction in the budget deficit for any G7 country. This is vital for credibility, vital for attracting inward investment."
It comes a day after Shadow Chancellor George Osborne seized on a warning by the world's biggest bond investor, Pimco, that the UK faced seeing its credit rating downgraded and it would be selling off UK government bonds this year. He said while "rigid limits" had not yet been fixed for departmental spending cuts that was because "future uncertainties remain" - but he said the government had provided "a much clearer and more coherent commitment than the opposition".
Our correspondent says the head of Pimco's European investment team is the brother of the cabinet minister who is said to have Gordon Brown's ear - his former economic adviser Ed Balls. And he defended government spending, saying it provided "vital demand" at a time of low activity in the private sector.
"Pull away that prop for the economy and you reduce the tax take, push up spending on unemployment and make the deficit worse. This is the paradox of government thrift," he said.
"We learnt it in the 1930s. It seems to be totally lost on the present day Conservative Party."
Lord Mandelson said Labour "must not confine itself to the politics of distribution" and said a "politics of production" was needed.
He said there was "never a case for punitive taxation" that removed incentives for "self improvement" or to set up businesses.
He said the new 50p tax rate on high earners was "justified in the quite exceptional circumstances we face" but said the government would "always be vigilant" the tax burden did not damage competitiveness.
Government spending
He described Conservative plans to reduce the deficit faster as "potentially dangerous nonsense" and said it could only mean that they would "cut spending more, put up taxation more and do all of this more quickly".
"This would only stall recovery, stymie growth, put unemployment up and the costs it imposes on us, reduce the tax take and make the deficit worse, not better."
Pull away that prop for the economy and you reduce the tax take, push up spending on unemployment and make the deficit worse Lord Mandelson
On Tuesday shadow chancellor George Osborne seized on a warning by the world's biggest bond investor, Pimco, that the UK faced seeing its credit rating downgraded and it would be selling off UK government bonds this year.
The head of Pimco's European investment team is the brother of Ed Balls, the cabinet minister who is said to have Gordon Brown's ear.
'Complete nonsense'
On Tuesday night, in Parliament, Mr Osborne labelled legislation aimed at halving the deficit in four years as a "feeble stunt".On Tuesday night, in Parliament, Mr Osborne labelled legislation aimed at halving the deficit in four years as a "feeble stunt".
He said the Fiscal Responsibility Bill was "complete nonsense" which had been dreamed up by Gordon Brown on the eve of last year's Labour Party Conference.He said the Fiscal Responsibility Bill was "complete nonsense" which had been dreamed up by Gordon Brown on the eve of last year's Labour Party Conference.
This government is to fiscal responsibility what Tiger Woods is to marital fidelity David Gauke MP
Mr Osborne was speaking during a debate on the Bill, which eventually received its second reading by 265 votes to 196, a government majority of 69.Mr Osborne was speaking during a debate on the Bill, which eventually received its second reading by 265 votes to 196, a government majority of 69.
Shadow Treasury minister David Gauke later quipped: "This government is to fiscal responsibility what Tiger Woods is to marital fidelity."Shadow Treasury minister David Gauke later quipped: "This government is to fiscal responsibility what Tiger Woods is to marital fidelity."
The election must be called by early June but the widely-expected date is 6 May.
Pre-election momentum has been building this week with speeches, advertisements and rows over tax and spending.
The Tories were accused of a £34bn funding gap in their policy commitments, amid some confusion over their plans for tax breaks for married couples.