British finance minister Alistair Darling denied on Sunday that a lack of clarity over public spending cuts or fears over a possible indecisive election were affecting sterling or other markets.
In a BBC interview, Darling said that the focus in Britain's forthcoming budget would be on securing the recovery and growth, saying opposition Conservative plans for immediate cuts would pose "an unacceptable risk to the economy".
Darling also said he did not plan to publish a spending review, which typically sets out spending plans for the next three years, now, because of continuing uncertainties about the economic outlook. That means the government will not have to set out politically sensitive plans for spending cuts in future years just before an election. The British pound fell to a 10-month low against the dollar and gilts fell last Monday after an opinion poll showed a greater chance that an election expected in May would lead to a hung parliament, in which no party has an overall majority. That poll pointed to the ruling Labour Party rather than the Conservatives becoming the largest party, unlike other recent polls. New polls on Sunday showed the Conservatives with a lead of between five and nine points. Markets think a Conservative government is more likely to take strong early action to cut Britain's budget deficit, forecast to reach 178 billion pounds ($267.6 billion) this year.
Darling said he did not think a lack of clarity over spending cuts was affecting sterling.
"If you look at what is happening in the markets at the moment, they are febrile. It's not surprising. The world, us included, is coming through one of the deepest downturns we've seen," he said.
He also denied markets were taking fright at the prospect of a hung parliament. "Everybody knows that we need to get our borrowing down." "I think ... the markets will have confidence (in government deficit-cutting plans). We will do it. Make no doubt about it, we are absolutely committed to doing that because it's part and parcel of making sure that we can get a secure future," he said.
The government has not given a date for unveiling the 2010/11 budget, expected to be the last big economic showpiece before the election, but The Sunday Times said the Treasury was working towards a budget date of March 24. Darling said the budget needed to secure the recovery as well as being a "budget for the future". "It is about securing growth, and of course it is also (about) making sure that as a country we live within our means, that we halve the deficit over a four-year period." Labour plans to halve the deficit in four years with cuts starting next year. The Conservatives demand action earlier.
Darling said the government needed to maintain public sector investment to support the economy. "I think to take it away now, to take it away prematurely, as the Conservatives are proposing, would present an unacceptable risk to the economy," he said.
The British Chambers of Commerce on Sunday revised down its forecast for British growth next year to 2.1 percent from 2.3 percent. It kept its prediction for 1.0 percent growth in 2010.
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