Chancellor: Dismissing "black hole" claims

The chancellor has been forced to defend his economic forecasts following fresh predictions that he would have to raise taxes in a Labour third term.

Gordon Brown told the Guardian newspaper on Friday that he had been proved right in the past and would be so again.

His comments came after the independent Institute of Fiscal Studies (IFS) found that there was an £11bn hole in his spending plans.

The think tank reported on Thursday that either taxes would have to go up or spending come down if Brown's own fiscal rules on government borrowing were not to be broken, echoing other outside observers.

The IFS's analysis on official public sector finances figures were only a repeat of previous warnings, but came at a sensitive time in the middle of the general election campaign.

The dispute centres on the chancellor's predictions for growth and tax revenues in the next economic cycle, which critics say are too optimistic.

But Brown said the contrary was true and that his accusers were overly pessimistic, as well as having been wrong in the past.

"People said Britain would suffer a recession," he said. "We proved them wrong.

"People say we won't meet our fiscal rules. Once again, with the public finances strong, we will prove them wrong."

Conservative cuts

However shadow chancellor Oliver Letwin said the IFS report was "yet more proof of what almost all independent experts now agree - that Mr Blair has a gaping hole in his finances which he will have to fill with higher taxes if he wins the election".

He has put aside £8bn of £12bn savings to reduce the national debt.

But the IFS also said that tax and spending would be higher at the end of the next parliament than it is now, regardless of the result of the election.

It also cast doubt on the Tory claim that a Conservative administration could cut government running costs by £35bn.

The Tory plans, it said, assumed that they would be "able to cut spending as quickly and painlessly as they claim. Past experience suggests caution."

If the Conservatives were unable to find their projected savings, they would face the choice of "spending and borrowing more than they intend or making other, potentially more painful, spending cuts to fill the gap".

Liberal Democrat spokesman Vince Cable said his party's spending plans were affordable.

"The Liberal Democrat plans are fully costed using government figures where available and there is no evidence to suggest that the figures outlined in our costings will not be achievable," he said.