Thursday November 13, 09:45 AM
UK's Darling says recession justifies higher borrowing
LONDON, Nov 13 (Reuters) - British finance minister Alistair Darling has defended plans to raise public borrowing to cope with a looming recession and indicated he will slash his growth forecasts at his forthcoming pre-budget report.
In an interview with Thursday's Independent newspaper, Darling said: 'We are going into recession. I remain confident that we will get through it.'
He said it would be 'daft' for the government to cling to old economic rules rather than adjust policies to confront the global financial crisis.
'It is right to let borrowing rise,' he was quoted as saying by the newspaper. 'It is also important that we come back into balance over the medium term.
'The basic principle is to support the economy now, but you have got to make sure you live within your means.'
Darling said Prime Minister Gordon Brown was right to abandon his longstanding fiscal rules that limited public borrowing to 40 percent of gross domestic product. They were often described by Brown, a former finance minister, as a sign of 'prudence.'
'It is prudent that you support the economy in the difficult times,' Darling said. 'It is prudent if you get long-term sustainability.
'What is imprudent is if you have a set of rules which you then apply regardless of what is going on around you and the consequences. That is when you get into real difficulties. To apply them willy-nilly without any regard to what they actually mean would be daft.'
On Tuesday, Brown said he was ready to provide fiscal stimulus to help the economy recover and he urged other countries to do the same. The Bank (NASDAQ: TBHS - news) of England signalled on Wednesday that interest rates may fall again after its surprise 1.5 percentage point cut last week took them to a 50-year low of 3 percent.
BoE Governor Mervyn King said 'the world had changed' during the recent economic turmoil.
Darling will present the government's annual pre-budget report to parliament on Nov. 24. Analysts expect he will revise up this year's public borrowing forecast by more than 20 billion pounds and next year's borrowing forecast by more than 40 billion pounds.
The Independent said the government's growth forecasts were likely to be in line with those published by the Bank of England on Wednesday. That points to a contraction of about 1.3 percent in 2009, a far cry from the 2.5 percent growth predicted in his March Budget.
(Reporting by Peter Griffiths and Christina Fincher; Editing by Leslie Adler and Victoria Main) Keywords: BRITAIN DARLING/
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