Mandelson sees recession ending

Business Secretary Peter Mandelson arrives for a cabinet meeting at Downing Street in London June 12, 2009. The recession in Britain is coming to an end but the consequences from it will last for some time and public spending will need to be constrained for the next decade, Mandelson said on Tuesday.

LONDON (Reuters) - The recession in Britain is coming to an end but public spending will need to be constrained over the next decade, business minister Peter Mandelson said on Tuesday.

Mandelson also said there was little prospect of Britain adopting the euro if Labour were to be re-elected at the next election due by mid-2010.

"The fall in the economy is coming to an end but the severity, obviously, is not yet behind us," Mandelson told reporters.

"Of course, there will be pressures on spending until 2011 and constraints for the next decade."

Some economists argue Britain is already emerging from recession -- the first among major economies to do so -- but policymakers have been more cautious, concerned that a dearth of bank lending will hold back any recovery.

In April's budget, the Treasury forecast growth would resume towards the end of the year.

Mandelson said it was vital to maintain government spending and investment during the downturn but said, in the future, there would be "less spending" in some areas with the government prioritising frontline services.

"Of course, we have to continue to prioritise within departments and across the board," he said.

How to bring Britain's record high public borrowing back into line would form a significant part of the battle for power at the next election, Mandelson said.

DEBT PROBLEM

Ratings agency Standard and Poor's has warned Britain it could lose its triple A credit rating because of fears its debt levels will soar higher than the government has forecast.

Markets are also concerned about a lack of policy detail on reducing borrowing from both the ruling Labour party and the opposition Conservative party. Opinion polls predict a big election win for the Conservatives.

"We will rebalance the public finances over the medium term," Mandelson said. "The next election is open ... The campaign will be more interesting than some seem to think."

Finance minister Alistair Darling says Labour will halve the deficit within five years. Borrowing is forecast to hit a record 175 billion pounds this fiscal year, more than 12 percent of Britain's gross domestic product.

When asked when Britain might adopt the euro, Mandelson replied: "I'm afraid that it's going to be quite some many years more than I would like. The prospects and chances of us joining the single currency early on are not strong."

Most analysts do not believe Britain will join the euro single currency for some time to come, if ever.

The Conservatives have said they would never adopt the euro and Labour, while in favour in principle of signing up, has set five stringent economic tests for membership and argues the conditions are not yet right to conduct them.

"The position is that every budget we assess whether or not there has been sufficient progress ... to decide whether or not to go ahead with a further five-test assessment and in the last budget we decided there was no such progress," a spokesman for Prime Minister Gordon Brown told reporters.

(Additional reporting by Keith Weir; editing by Stephen Nisbet)