The prime minister has insisted the Treasury is on course to meets it targets and denied the government will need to raise taxes.

Questioned by a committee of senior MPs on Tuesday, Tony Blair said he is "reasonably optimistic about our forward growth".

Amid prediction from leading economists that the chancellor will have to break his own rules on borrowing or increase taxes in order to fund Labour spending plans, Blair gave strong backing to Gordon Brown.

Treasury committee chairman John McFall said projections for tax receipts were "inherently implausible" while the prime minister's former speechwriter said this week that a new top rate of tax is under active consideration in Number 10.

But Blair said there would be no need for tax rises in a third term in power, pointing out that recent figures on government revenues had been unexpectedly strong.

"I think the debate we need to have is what is the likely path for the economy in the future? And are the Treasury forecasts right?" he said.

"It is correct that the surplus has come down over a number of years. That is not unnatural because there has been an economic slowdown.

"Economic progress starts to pick back up again and the forecasts over the next few years are obviously different and better.

"The debt to GDP ratio, I think I am right in saying, is lower than in 14 out of the 18 years of the previous government. I think we are still in a very, very strong position."

'Blessing'

He conceded that high oil prices "are a potential issue".

"Although I think it is remarkable to anyone who lived through the period of the 1970s how this rise in oil price has taken place and hasn't had a bigger economic impact on growth prospects," he added.

Paying tribute to Brown he said "it has been the great blessing that we have had in the UK our economic management over the past few years".

"We have managed to grow strongly with low inflation, low mortgage rates and high employment," he said.

"The problem when I was growing up was the every time unemployment started to fall inflation started to rise.

"We have avoided that in part because of very active labour market measures."

And he predicted that the chancellor would again prove his critics wrong.

"The best test of the credibility of fiscal policy has been the Treasury forecasts up to now which have proved more robust and right than some of the critics," Blair said.

"We have got strong growth, we've got revenue figures which were strong, receipts are up.

"We believe that we will meet both the golden rule and the sustainable investment rule."