Darling says rate cuts alone not enough

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LONDON (Reuters) - Chancellor Alistair Darling welcomed the Bank of England's decision to cut interest rates on Thursday but said monetary policy alone was not enough to kick-start the economy.

The bank slashed interest rates by a full percentage point to a 58-year low of 2 percent on Thursday but indicated more needed to be done for banks to resume lending normally.

"As the governor of the Bank of England has said, monetary policy -- interest rate cuts -- on their own are not enough," Darling told a business audience in Edinburgh.

"It has to be matched by significant and substantial action from the government -- cutting taxes and supporting business."

Darling unveiled a 20 billion pound package of tax cuts and spending increases last week in the hope of preventing a recession spiralling into a slump.

While many economists expect the economy to contract throughout next year, Darling voiced optimism the economy would see a relatively speedy recovery.

"With interest rates falling again today (and) the support announced in my pre-Budget report last week, I am confident that the slowdown will be shallower and shorter -- and that growth will resume again," he said.

(Editing by Andy Bruce)

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