Bank of England governor Mr Eddie George dismissed concerns yesterday that the British government was facing a gaping budget deficit due to slower than expected economic growth.

A growing number of economists have forecast Chancellor of the Exchequer Mr Gordon Brown will miss his forecasts for small public deficits of around £11 billion sterling this year and next by a big margin as an economic slowdown has cut tax receipts as the government ramps up spending on key public services.

But, asked on BBC's Breakfast with Frost programme if he saw a big shortfall, Mr George said: "Oh no, not a serious black hole. I think our public finances are in much better shape than most other countries in the world. The Chancellor still has room for manoeuvre and I am sure he will use it sensibly."

Mr Brown will present his pre-budget report to parliament on November 27th and is set to revise down his forecasts for economic growth and for the public finances for this year and next.

Mr George acknowledged that the economy this year would grow by less than either the bank or the Treasury had forecast earlier in the year. "But the economy is now growing at around trend and I expect that to continue," he said.

Mr George said it was in fact helpful for the British economy that Mr Brown's planned deficit may be larger than expected because it would help support the economy.

He also criticised the euro zone's stability and growth pact which is causing European Union governments to cut spending or raise taxes when their sluggish economies require the reverse. "There is a real question about the interpretation and perhaps the specification of the stability and growth pact in Europe," he said. "It needs to be looked at again."

Britain is one of only three European Union countries not to have joined the 12-member euro zone and Mr George carefully avoided being drawn on the issue of whether Britain should join.

He repeated that he thought the international economy, which was the key to developments in Britain, was now past the worst.

"I think we are going to see modest progress internationally and that will be a helpful environment for the UK. I think we will at some point need to see a moderation in the pace of growth of consumer spending and a pickup in business investment and I think that is quite possible without generating inflation pressures." - (Reuters)