Brown calls for action on growth before EU summit

By Sumeet Desai

LONDON (Reuters) - Global coordinated interest rate cuts to aid growth should be backed up with a fiscal boost to the economy, British Prime Minister Gordon Brown said on Friday ahead of a meeting of European Union leaders in Brussels.

He also said that Britain's main banks had been called in for a meeting with the government and told to pass on Bank of England rate cuts to their customers and resume lending to help get the economy moving forward again.

The BoE delivered a shock 1.5 percentage point cut in rates on Thursday, taking borrowing costs to 3 percent, their lowest level in more than 50 years. The Swiss National Bank cut rates at the same time and the European Central Bank soon after.

Brown said he had had talks with other world leaders, including U.S. President George W. Bush and President-elect Barack Obama, and would be meeting French President Nicolas Sarkozy and German Chancellor Angela Merkel later to discuss how fiscal and monetary policy could work together.

"Coordinated action on interest rates should be complemented by action on fiscal policy," Brown told reporters in a briefing at 10 Downing Street.

Asked if that meant tax cuts ahead, the prime minister pointed to the government having already cut taxes this year for several million households, scrapped a rise in fuel duty and raised the threshold at which tax on buying property is paid.

Finance minister Alistair Darling is expected to present an updated budget statement later this month and government borrowing is already up sharply, which normally would give little leeway for tax cuts or additional spending.

But both Darling and Brown have repeatedly stressed the importance of boosting the economy, which shrank in the third quarter for the first time in 16 years and is expected to contract more sharply next year.

BANK MEETING

The BoE has now cut interest rates by a total of 2 percentage points in the past month, but there is concern that banks are not passing on these cuts in borrowing costs to their customers as lenders remain strapped for cash because of the global credit crunch.

Mortgage lending has all but dried up, prompting a slide in house prices greater than in the early 1990s property crash, and many businesses are finding it hard to raise finance to stay afloat.

Figures out on Friday showed the number of companies going under in England and Wales in the third quarter jumped 10.5 percent on the previous quarter -- an increase of 26.3 percent on the same period a year ago.

"We have seen cuts in interest rates," Brown said. "It is important that these cuts are passed on."

"We are determined that not only are these cuts passed through but lending resumes ... at rates that are appropriate, not excessive."

(Editing by Patrick Graham)