Government Borrowing Strife

By David Stringer

BRITAIN'S Treasury chief last month suggested the government may change its rules on government borrowing - a decision that would prove an embarrassment to Prime Minister Gordon Brown.

The government currently limits its borrowing to no more than 40 percent of Britain's annual national income. But an estimated £8bn shortfall in tax revenue, thanks to the global economic slowdown, means more is needed to cover public spending.

Brown has said repeatedly he would not break the borrowing rule, which he introduced in 1997 when his Labour Party won office. Critics say, however, that he may have to revise the limit upward to avoid breaking it.

Treasury chief Alistair Darling said the government was considering a change in the policy.

Darling also said the British government's debt levels compared favorably with the United States, France and Germany, but he did not elaborate.

Brown's opponents have seized on the borrowing issue as apparent proof that the prime minister - who was Treasury chief for more than a decade under former Prime Minister Tony Blair - has lost his record of economic competence.

CREDIBILITY

"The Brown era of economics is over," Conservative lawmaker George Osborne, the party's spokesman on economic affairs, said in a statement. "He staked his credibility on the fiscal rules."

Osborne said Brown had failed to properly prepare for a downturn and is likely to be forced to redraft his borrowing targets to avoid breaking the current rule.

"The public finances are in a mess, and the rules are being ditched. It's like giving the prisoner the keys to their own prison cell," Osborne said.

The Labour Party held a policy conference to help draft a manifesto the next national election. An election must be held before mid-2010.

Unions have said they plan to submit as many 130 demands for reforms of current policies - including improved public sector pay, tax breaks and a complete British withdrawal from Iraq.