Brown warns of economic trouble ahead

LONDON, Wednesday

British Prime Minister Gordon Brown sees risks to the economic recovery and says it is not the moment to change course as he prepares for an election by June.

Mr Brown, the former finance minister, set out his views on how he thinks a recovery can be assured and future growth created in a speech at Thomson Reuters offices in Canary Wharf today.

“We are at a turning point, a crossroads, for our domestic economic recovery - and for the global economic governance that will shape the next decades for us and our children, and for families and children all across the world,” Mr Brown said.

In a pre-election swipe at the main opposition Conservative Party, Mr Brown said it was too early to withdraw support for the struggling economy and offered a glimpse of the ruling Labour Party’s plans by announcing a pay freeze for senior public employees.

Mr Brown’s speech in London signalled a big shift in gears in unofficial campaigning for a general election that must by held by early June at the latest.

Analysts said the announcement of the budget date as March 24 indicated that the rumoured election date of May 6, favoured because it allows the combination of local and national polls, was the most likely.

The state of the British economy is expected to be a major factor in the campaign. It emerged hesitantly from an 18-month long downturn at the end of last year, but gross domestic product growth remains weak and many fear a “double dip” recession.

“We dare not risk the recovery,” Mr Brown said today. “For our task above all else is to preserve and expand the jobs — and lift the standards of life — of the British people. We are weathering the storm, now is no time to turn back.”

“We have got through this storm together but there are still substantial risks ahead. There will be bumps in the road,” he added.

Tackling the country’s burgeoning debt is a key point of difference in what is shaping up to be a closely fought election between the Conservatives and Labour.

Economists warn that Britain is on course to borrow the equivalent of 12.8 per cent of gross domestic product in 2009/10 — exceeding the 12.7 per cent forecast in crisis-hit Greece and far above the average 6 per cent for Europe.

Conservative Treasury spokesman George Osborne has pledged to announce a new budget within weeks if his party is elected, which will include spending cuts from the summer.

Mr Brown said today that the government remains committed to halving the deficit within four years from a record peak of 178 billion pounds ($265 billion) this year.

But he is wary of moving too soon, warning that immediate, major cuts to stimulus, via less spending and higher taxes, could send Britain into a dreaded double-dip recession.

“Although the economy is now growing, recovery is still in its early stages — and remains very fragile,” Brown said. “There will be many months ahead of conflicting statistics, false hopes and mixed signals.”

The pay freeze for senior civil and military staff, judges, senior health service managers, doctors and dentists follows a freeze imposed on ministers’ salaries announced in December.

Mr Brown said those measures would save the government money immediately and some 3 billion pounds by 2013-2014.
The British leader is attempting to win back support for his guidance of the domestic economy. (Agencies)