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Last Updated:  Wednesday, 9 April, 2003, 14:37 GMT 15:37 UK
Brown's gamble worries City
Gordon Brown
Some economists fear Mr Brown is creating a black hole
Gordon Brown's bullish assessment of the UK's economic prospects has been criticised by City economists.

The chancellor has gambled on a return to strong economic growth in 2004/05.

He needs the cash from extra tax receipts to cover increased borrowing costs, as big rises in public spending kick in.

But Mr Brown has already been forced to rethink his optimistic growth forecasts for this year, as the economy fails to respond to interest rate cuts.

'Black hole'

And some City analysts say Mr Brown will have to go back to the drawing board again in the Autumn.

The only reason the borrowing projections work is because of that optimistic growth assumption
Alex Scott, Seven Investment Management

They fear a "black hole" is opening up in the country's finances, as borrowing starts to outstrip income.

DeAnne Julius, a former member of the Bank of England's interest-rate setting Monetary Policy Committee, led criticism of Mr Brown's strategy.

"He is placing his hopes on a quick recovery this year and next but if that does not happen, we will see a ballooning deficit in the coming years and not a shrinking one," she said.

Kamal Sharma, currency economist at Commerzbank, said: "He hasn't downgraded his growth forecasts as aggressively as some in the market were looking for."

But, he said, Mr Brown had kept his forecasts "within market expectations".

He added: "The growth forecast for next year was slightly optimistic so I wouldn't be surprised if he downgrades it again in the pre-Budget report later in the year."


Alex Scott, analyst at Seven Investment Management, also predicted a further downgrade in the chancellor's forecasts.

This Budget just adds to the financial misery of the council tax rise we have suffered - it is take, take, take

"For the current year, it's just about OK.

"The only reason the borrowing projections work is because of that optimistic growth assumption."

But Martin Dobson, head dealer at NatWest Stockbrokers, was more positive in his assessment.

"It's a very cautious Budget.

"The statement so far seems in line with expectations, particularly the cut to the growth forecast, which was well forecast. The market seems to have taken it in its stride," he said.


Philip Shaw, analyst at Investec, said Mr Brown's forecasts looked "very optimistic" and required "a significant upturn in the world economy".

But the chancellor was praised by TUC general secretary elect Brendan Barber.

"This was a sensible, 'steady as she goes' Budget, with no great fireworks but many useful changes that will boost skills, tackle poverty and help regions.

"The chancellor has held his nerve.

"The world economy is going through a difficult patch.

"The UK is not immune but it is a measure of the government's success that we are doing much better than most."

Chancellor Gordon Brown
"It is now time for the world's richest countries... to fulfil their obligations to the poorest"

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