MercoPress. South Atlantic News Agency

PM Brown says “fiscal action” to help families is on the way

Britain's Prime Minister Gordon Brown promised “real help for families and businesses” to battle recession as he paved the way for tax cuts to be announced next week.

He said "it makes sense for Government to support interest rate cuts with fiscal action" and predicted administrations across the world would shortly be following suit. But he also raised the spectre of deflation - a consistent fall in prices, sparking a recessionary spiral. Mr Brown's comments, in a statement to MPs on last week's G20 meeting in Washington on the financial crisis, came after speculation fuelled by Government insiders that next week's Pre-Budget Report would feature boosts for low-income families alongside spending pledges. The UK PM pledged: "It makes sense for Government to support interest rate cuts with fiscal action that is giving real help to families and businesses now, and I believe that we will see in the next few weeks many countries following with expansionary measures." Earlier the Prime Minister, speaking at No 10 after economic talks with EU President Jose Manuel Barroso, said: "Britain, like many other countries in Europe, is ready to make its contribution for a temporary and affordable fiscal stimulus. It is now clear that the need for an urgent fiscal stimulus, within a medium-term framework of fiscal sustainability, is overwhelmingly accepted across the world." In his exchanges with Mr Cameron, the Prime Minister spelled out his warning of inflationary pressures being replaced by falling prices stifling demand in the economy. He told the Tory leader: "I don't think you realise that while last year and in the last few months, the problem has been inflation - and inflation combined with the credit crunch. "Next year, the problem is deflation and the problem of inflation close to zero. And the answer is, as everybody has said at this international conference, that you can combine monetary policy with fiscal action so that you have the best impact on growth in the economy." Asked why Mr Brown was warning about deflation, his spokesman said: "This is obviously a risk. Clearly the Governor of the Bank of England was also talking about the risk last week, though both the Government and the Bank of England are making clear that is not our central forecast expectation. "We have seen sharp falls in commodity prices and food prices in recent times, which is obviously of benefit to families, but if demand in the economy is too low that carries significant risks as well."