World News

British Prime Minister Gordon Brown accused rival Conservatives on Wednesday of planning big public spending cuts, trying to regain the initiative after he quelled a rebellion in his ruling Labour party.

Brown also proposed measures to reform parliament to rebuild public trust in politics after an expenses scandal which damaged all the main parties in last week's European elections. Labour, in power since 1997, was hardest him and came third.

Labour was destined to lose a general election due by mid-2010 long before the political turmoil of the past week and a convincing Conservative victory would be the best outcome for markets, a Reuters poll of economists found.

One area bound to dominate the run-up to the vote will be how best to tackle record government borrowing when Britain's economy starts to recover.

Analysts say the Conservatives will act more swiftly than Labour, but the opposition has yet to outline its plans.

"The choice, whenever it comes, is between a government which is prepared to invest in the future and the Conservative party that is going to cut," Brown told parliament, seizing on remarks by a Conservative health spokesman suggesting some departments face 10 percent budget cuts over 3 years from 2011.

The opposition denied such swingeing cuts were planned. Conservative leader David Cameron said Labour was also planning to reduce spending and not being honest with the public.

Brown is seeking to reassert his authority and galvanise his party after several senior cabinet ministers resigned, and following disastrous European elections which saw Labour win its smallest share of a national vote since 1910.

The debate over the future of public spending coincided with a report by managers of Britain's state-funded health service that said its survival was under threat because of a looming funding crisis.

British government borrowing is forecast to hit a record 175 billion pounds this year due to the recession and bank bailouts.

Finance minister Alistair Darling, who is expecting an economic recovery towards the end of the year, has said he does not expect to balance the books for nearly a decade.

There have been signs that Britain could be emerging from recession far soon than expected.

The economy shrank 1.9 percent in the first three months of 2009, the third straight quarter of contraction, but a respected economic think tank said on Wednesday the economy was already growing in April and May.

Public faith in the political system has slumped because of disclosures about outlandish, taxpayer-funded expenses claims by members of parliament from across the political spectrum.

Brown said the government would push ahead with reforming the unelected upper chamber of parliament, the House of Lords and said all MPs expenses would be published on the Internet.

His proposals were seen to be aimed at defusing calls by Scottish and Welsh nationalists for an early national election as the only way to clean up parliament after the scandal over politicians' expense claims.

A motion tabled by the two nationalist parties, calling for the dissolution of parliament to pave the way for a national election, was defeated on Thursday by 340 votes to 268, a majority of 72.