Britain's opposition Conservatives warned the government today against trying to spend its way out of a recession as speculation grew that ministers may be planning emergency tax cuts.
British newspaper reports at the weekend suggested that a tax-cutting package would be unveiled in the pre-budget report expected later this month.
Prime Minister Gordon Brown said on Friday there was a growing international consensus that fiscal policy could be used in tandem with monetary policy to support economic growth - a comment which has been seen as a hint at possible tax cuts.
Conservative Treasury spokesman George Osborne said tax cuts could help, but only if they were part of an overall plan and "properly funded".
Writing in the Financial Times, he said monetary policy remained "the principal tool for stimulating demand", adding that central banks must be given room to deliver co-ordinated "sustained and substantial" interest rate cuts if needed.
"Spending our way out of recession will not work. Targeted tax cuts would help, but they must be properly funded."
"Any tax cuts must not permanently increase the structural deficit and must be combined with a strategy to reduce it over time," Mr Osborne wrote.
He said if the deficit was not cut "future generations will be burdened with even more debt and a recovery would be threatened by the prospect of large tax rises".
"We would be sowing the seeds of the next crisis."
Reuters