Britain could default on its debt, says Cameron

Tory leader stokes fears over Labour's record deficit

David Cameron warned yesterday that Gordon Brown's spending could lead to Britain defaulting on its debt.

In an attempt to maintain pressure on Labour over government borrowing in the run up to the election, Cameron said that Labour's plans to more than double the national debt to £1.4tn in the next five years was a "disgrace".

Highlighting record levels of borrowing, as he spoke at the Royal Society of Arts in London, Cameron accused the government of taking unnecessary risks with borrowing and spiralling debt levels.

Cameron said: "You can get to a level of government debt where, not that it becomes certain that people will cease to lend you the money, but you start running risks of them demanding higher premia, higher interest rates. Or you run the risk of not being able to meet your obligations."

He was careful to qualify his comments after being accused by Labour earlier in the year of talking down Britain when he said that Brown might be forced to apply to the IMF for a loan.

He continued: "I have never predicted that is going to happen. But as government borrowing goes up and up and up, you start running that risk. You should not be running that risk ... I'm not saying it's going to happen, but the government, with the levels of indebtedness they have, they are running those risks."

The opposition leader was condemned by Labour politicians for his comments. John McFall, Labour chairman of the Commons Treasury select committee, said: "This is economic policy by innuendo. It serves no one, not least the government and not himself as an aspirant to government, to frame the economic debate in such loose language. He knows himself that this is a global problem."

In record borrowing levels for peacetime, Darling estimated in the budget that Britain would need to borrow £175bn to balance the books this year - almost 12% of GDP. This has rapidly risen from £35bn two years ago in an attempt to soften the effect of the recession.

A Treasury spokesman stressed that there were clear plans in place to halve the deficit in five years, and said: "Any suggestion that Britain could default on its borrowing is wrong and irresponsible."

Cameron's speech is seen as an attempt to regain ground after Daniel Hannan, a senior Tory MEP said that the NHS was a "60-year mistake".