Brown's gloom hints at rate cut

GORDON BROWN will publish a gloomy economic forecast next month - a day before the Bank of England decides whether to cut interest rates again.

The Chancellor's decision to unveil his draft Budget on 4 November, three weeks earlier than last year, will be seen by some observers as a way of putting pressure on the monetary policy committee (MPC) to reduce interest rates further.

Mr Brown's Commons statement, setting out the framework for his Budget next spring, will reveal the Treasury's assessment of how the global economic crisis will affect Britain. He is expected to predict growth of 1 per cent next year, down from his previous forecast of between 1.75 and 2.25 per cent.

The Chancellor will speak as the MPC begins its monthly two-day meeting. Its decision will be announced the day after his statement. Yesterday, ministers insisted that the timing would make no difference to the MPC because it already knew the Treasury was scaling down its growth forecast.

The Government has denied trying to "bounce" the committee into lowering rates, and Eddie George, Governor of the Bank of England, said last week there was no such pressure before this month's 0.25 percentage point cut.

Mr Brown will tell MPs that he is sticking to his plans to boost public spending by pounds 57 billion over the next three years, despite the economic downturn, saying they will be safeguarded by the pounds 30 billion reserve kitty at his disposal.

But fresh doubt about the Government's ability to deliver its spending promises emerged yesterday when a study commissioned by the Tories said that Mr Brown could face a "black hole" of up to pounds 36 billion if growth slows to 0.5 per cent next year and recovers to only 1 per cent in 2000. William Hague, the Tory leader, wrote to Tony Blair last night, demanding a statement today in the Comons on the Government's economic strategy.

Meanwhile, several surveys out today paint a bleak picture of Britain's economic outlook. Business confidence is shown to be at its lowest since the last recession, while the number of companies going out of business is steadily rising.

A survey to be published by the AEEU engineering union tomorrow will show that 5,500 jobs have been lost this year because of the strong pound and high interest rates. Yesterday, the AEEU called for a half- point cut in rates.

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