British finance minister Gordon Brown stuck to his confident economic forecasts and unveiled measures to woo voters and investors in a budget speech that may be his last before Prime Minister Tony Blair hands him power.
"The British economy is strong and strengthening," Brown declared to a packed parliament as he forecast growth accelerating to 2.75-3.25 percent in 2007 from 2.0-2.5 percent this year, in line with his pre-budget report in December.
But he was forced to increase his forecast for government borrowing for the 2006/07 fiscal year by two billion pounds to 36 billion pounds, further limiting his options in next year's review of spending.
"I think that's the result of starting with a bigger deficit this year than planned," said Lloyds TSB economist Trevor Williams. "Once again, it is borrowing that's taking the strain and it implies to me that he may not try to find the tax increases for that."
The British economy grew by just 1.8 percent in 2005, the weakest pace in 13 years, casting a shadow over Brown's long record. Public borrowing in February was the highest for that month since Labour came to power in 1997.
The main news for the financial markets was a ramping up of long-dated government bond issuance to ease a shortage that has pushed bond yields to record lows and driven up the pensions deficits of some of Britain's biggest companies.
Brown said long-dated gilts would increase to around two-thirds of total issuance in the coming fiscal year. Sterling was steady while gilts, which initially fell on news of greater supply, reversed course on news that total sales will fall well short of market expectations.
But the 10th budget statement of the so-called "Iron Chancellor" was as much about politics as economics.
Brown pleased property investors by setting a charge for property companies to convert to tax-efficient Real Estate Investment Trusts (REITs) much lower than expected - sending shares higher - and announced measures to help families and homeowners.
He raised the threshold for stamp duty on house purchases by 5,000 pounds to 125,000 and said the threshold for inheritance tax on estates would rise to 325,000 pounds over four years.
And he drew praise from environmentalists for a range of measures including a revamping of vehicle excise duty to hit gas-guzzlers and a fund to promote new green technology.
"Gordon Brown has set the right direction of travel on climate change and these measure signal intent to start changing behaviour at a household level," said Guy Thompson of the Green Alliance lobby group. "To be honest, I was surprised how far he went."
Politicians of all hues were itching to see Brown clash with Conservative leader David Cameron for the first time as the two will almost certainly fight each other for the keys to power at the next election.
Blair has said he will not contest another election and Brown, 55, is odds-on favourite to succeed him as leader of the ruling Labour party which after nearly a decade in power is facing a resurgent opposition.
A handover to Brown does not look imminent but Blair is facing growing calls to step down, not least from a sizeable chunk of Labour members who have successfully opposed a number of his legislative plans in the past year.
Pressure on Blair has ratcheted up in the past week after it was revealed rich businessmen were nominated for seats in the upper house of parliament after lending Labour large sums of money which were not publicly declared. Brown's aides said he was not aware of the loans.
Comments
Comments are closed.