Britain signals move to drop budget 'golden rules'

LONDON: British finance minister Alistair Darling was to call on Wednesday for a "new response" to the global slowdown, fuelling speculation that London is set to relax long-standing fiscal "golden rules."

Darling was to say that the credit crunch would force governments to "take a more flexible approach and embrace new thinking," his office said, releasing extracts from a hotly-anticipated speech to be delivered Wednesday evening.

"Today, governments all over the world are using approaches that had until recently been consigned to policymaking history. But it is natural that the conduct of policy should evolve," Darling was to say in a speech at City University in London.

"Just as markets change, so should policy ... I want to set out how governments should respond to this new challenge, which I believe demands a new response - both at home and abroad."

Under so-called "golden rules" set by Gordon Brown when he became chancellor under then premier Tony Blair in 1997, the British government notably pledged to keep debt under 40 percent of Gross Domestic Product (GDP).

But that rule has been stretched to near breaking point by the turmoil triggered by the US-based global credit crunch, with tax revenues set to slump as spending balloons in a bid to keep the economy from stalling.

Brown, who succeeded Blair as prime minister last year, signalled earlier this week that he was prepared to increase borrowing in a bid prevent ease the depth of what could be a prolonged recession.

Darling was to underline in his speech Wednesday the need both for coordinated international action, but also for new measures domestically.

"Three weeks ago, we worked with other countries to put in place a plan to stabilise the banking system. These countries are committed to working together to strengthen supervision in the global financial system," Darling was to say.

"And today we need the same determination to support the wider economy. To ensure that fiscal policy supports monetary policy, here and across the world, in these exceptional circumstances."