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Last Updated: Wednesday, 17 March, 2004, 18:03 GMT
Caution the keyword for Gordon

By Evan Davis
BBC News economics editor

This wasn't going to be an easy Budget for the chancellor, because despite the strong performance of the economy, borrowing is uncomfortably high.

A guide to the ups and downs of the UK economy

So Mr Brown was a little boxed in. He didn't have enough money to make big giveaways; it's too close to an election to make big tax rises. So, unsurprisingly, he delivered a cautious Budget.

There was a bit of shuffling of money - more cash TO pensioners this year, a little more taken FROM closing tax loopholes.

And he announced cautious increases in public spending for the next three years.

Sure - the spending numbers sounded very big when expressed in billions of pounds. But in truth he was really telling us that public spending is now stabilising as a share of our total economy. The party's soon going to be over.

Too optimistic

Cautious and relatively prudent it was. But the Budget still leaves two big questions hanging over the chancellor.

As an act of political economics, this Budget will be highly controversial. As a game of political chess, it was very clever indeed
Andrew Marr, BBC political editor

On the tax side, is the chancellor being too optimistic in believing that his finances will improve, and borrowing fall, without extra tax rises?

No-one's certain - but most independent forecasters think taxes DO need to rise.

And on the spending side, is he being too optimistic in believing he can improve front-line services - like schools and hospitals - by cutting waste and bureaucracy?

He's hoping to shed thousands of civil service jobs - and get big efficiency increases in each department.

The issues of potential tax rises and who can make the public sector most efficient are the ones that will define the arguments of the next election.


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