March 27 (Bloomberg) -- Prime Minister Gordon Brown retreated from suggestions he was planning a big new fiscal stimulus, saying measures in Britain’s annual budget next month will be “cautious” and “targeted.”

The comments mirrored those of Bank of England Governor Mervyn King and Chancellor of the Exchequer Alistair Darling, who said the Treasury must keep its deficit under control after a government bond auction failed for the first time since 2002.

“I am someone who is cautious by nature,” Brown told broadcasters during a visit to Sao Paulo, Brazil. “What Mervyn King was saying is what I have always said, that you have to be cautious about everything you do. Mervyn King has actually said that he would be prepared to support targeted actions.”

Brown has been paring back suggestions that leaders from the Group of 20 nations should agree a package of tax cuts and spending increases when they meet in London on April 2. While President Barack Obama is working on a stimulus, Germany and France said they’ve already done enough. The U.K. Treasury and central bank say Brown can’t afford to do much himself.

“As much as Brown is lobbying on the international stage for more fiscal action, Darling has been holding the line against that,” said Malcolm Barr, an economist at JPMorgan Chase & Co. in London. “The whole thing is very messy.”

Recession and Deficits

With the U.K. economy in its worst recession since 1980, tax revenue is drying up as expenditure on benefits surges. The Treasury expects a deficit of 118 billion pounds ($170.7 billion) in the current fiscal year, equivalent to about 8 percent of gross domestic product. Darling ordered a 20 billion- pound stimulus in November and presents his budget April 22.

German Chancellor Angela Merkel and French Finance Minister Christine Lagarde have brushed aside Brown’s calls for further stimulus in their countries. The European Commission rapped Britain this week for planning a deficit it said would touch 9.6 percent of gross domestic product, triple the region’s limit.

“If we want to increase the effectiveness of such a stimulus package, then we first have to implement it, so to speak, and not to begin speaking of the next measure when the first one isn’t through,” Merkel said after meeting Brown in London on March 14. “We’ve already taken a huge step.”

Stimulus Measures

The U.S., China, Spain, Australia and Saudi Arabia will introduce budget stimulus measures worth 2 percent or more of gross domestic product this year, the International Monetary Fund says.

In Britain, two-thirds of voters think the government should spend less on administration in the public services and maintain funds for police, health and schools, according to a YouGov Plc poll of 2,104 voters finished March 26. Only six percent wanted an increase in spending.

Yesterday, Darling said he would target measures in the budget to help struggling businesses and those who have lost their jobs. He previously has said he’d also help people whose income depends on bank savings.

Britain’s budget deficit tripled in the first 11 months of the current fiscal year to a record 75.2 billion pounds as welfare payments climbed and tax revenues fell. On March 25, the government failed to sell all the 40-year bonds it offered in an auction to investors.

Treasury Pledges

Since November’s stimulus, the Treasury has pledged 40 billion pounds to recapitalize institutions including Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc and guarantees for 585 billion pounds of toxic assets. Brown and Darling have said they will take all action necessary to protect the economy.

“We must not rule out the action that is necessary for jobs and growth,” Brown said today. Steps may include “action on mortgages,” on “climate change” and on a “low carbon recovery,” he said. Brown also said the government may consider spending more on “public works or investment.”

To contact the reporters on this story: Gonzalo Vina in Brasilia at gvina@bloomberg.net

Last Updated: March 27, 2009 07:43 EDT