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Gordon Brown sounded a retreat yesterday from injecting more borrowed cash into the economy, amid evidence that confidence in Britain’s ability to repay its record debts is faltering.

The Prime Minister played down the prospect of further tax cuts in the Budget the day after Mervyn King, the Governor of the Bank of England, warned that the country might not be able to afford a second fiscal stimulus.

Mr Brown’s room for manoeuvre was reduced further when it emerged that an auction of gilts — government debt — had failed, in what analysts said was a clear warning from investors over Britain’s borrowing.

Speaking in New York, on the latest stage of his world tour before next week’s G20 summit in London, Mr Brown also backed away from demands for other countries to pump in more cash. His remarks took him closer to the position taken by Mr King and Alistair Darling, the Chancellor.

The Prime Minister arrives in Brazil today to continue to build support for “the biggest financial stimulus the world has ever seen”. His efforts, though, are being increasingly hampered by constraints in Britain.

Asked by Robert Thomson, Editor-in-Chief of The Wall Street Journal, about Mr King’s appeal for caution, Mr Brown said that fiscal measures were only one of three ways to stimulate the economy.

“We’re doing it by interest rates being incredibly low, we’re doing it by our fiscal stimulus and we’re doing it by what is probably not yet understood by the public as one of the most effective and quicker ways of getting activity moving in the economy — by quantitative easing,” he said.

In a further sign that Mr Brown has been forced to rethink another package of tax cuts in the Budget next month, he said that it was important to monitor how existing measures were working first.

Echoing Angela Merkel, the German Chancellor, who is resisting pressure for another fiscal stimulus, he said: “Nobody is suggesting that people come to the G20 meeting and put on the table the budget that they’re going to have for the next year. What we are suggesting is that we have together to look at what we have done so far . . . and then say, ‘What should happen next?’.”

He added: “Every country will have its own timing for announcing its fiscal and monetary decisions. Nobody is trying to upset that timing.”

Nevertheless, international leaders were determined to do “whatever it takes to make sure that we can restore the economy to growth”.

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