The Bank of England will have the Government's support if it opts for further increases in the cost of borrowing, the British Chancellor of the Exchequer Mr Gordon Brown has indicated
Mr Brown told business leaders at the annual conference of the British Chambers of Commerce in London that the Government would allow neither spending nor inflation to take off in the run up to a general election.
Although Mr Brown did not refer directly to interest rates - the Bank has increased its base rate twice in the past five months and it now stands at 4% - he told his audience: "I assure you that having taken the tough decisions in 1997 we will continue to put stability first, and we will support our monetary authorities in their difficult decisions."
Mr Brown continued: "We will not make the two mistakes that all post-war governments have made, and that is to be complacent and let inflation get out of control, or to be complacent and let spending get out of control.
"Let us recall that at this stage in the economic and political cycle, past governments have resorted to short-term fiscal policy.
"They have gone on to raise the rate of spending in a pre-election spree.
"But I can tell you ... we will avoid short-termism.
"While meeting all our commitments, to transport, to law and order, and to health and to education and meeting the fiscal disciplines and rules we have set ourselves, we will lower not raise the rate of spending growth in the coming spending round.
"Current spending rose in real terms by an average of 4% between 2000 and 2004, it will grow by just an average of 2.5% in real terms between 2006 and 2008."
PA