Prudence may no longer be the flavour of the month in the Treasury, judging by early indications of the content of Gordon Brown's pre-budget report tomorrow.

The Chancellor gave a clear signal yesterday that he will abandon his penny-pinching ways which restored the nation's coffers to profits in favour of borrowing to bankroll the Government's grandiose spending plans.

The Government would not be diverted from its "long-term course" of investing in Britain's infrastructure, schools and hospitals by the current global economic slowdown, he told a CBI conference in Manchester.

Speculation has been rife over possible rises in tax or borrowing to fill the gap which has opened up in the Government's finances because of lower than expected growth.

Mr Brown made clear there was no question of him reining in the massive boosts to public service investment he announced in April.

He told the CBI: "Some have suggested that the right approach in the face of slower growth is that, instead of holding firm to our long-term course, we should cut spending and borrowing irrespective of the stage of the economic cycle and the need for public investment in transport and our infrastructure - even when inflation is low and even when the underlying fiscal position is sound.

"In my view, the consequences of such a short-term and deflationary approach would be higher unemployment, depressed demand, lower growth, with, as in the past, capital spending on infrastructure the first casualty of cuts".