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Tuesday, March 17, 1998 Published at 18:12 GMT

Government finances to balance by 2000

The Chancellor, Gordon Brown, has promised a balanced budget by the year 2000.

The Chancellor forecasts the country's economy for the year ahead ('3 ''50).
He said public sector borrowing for 1997-8 would fall to 5bn from the 19bn planned under the Conservative Government.

Mr Brown explained that immediate action had been required to secure long-term deficit reduction after the Conservative Government left Labour with a cyclical deficit and a substantial structural deficit of 2% of national income. He said the five-year deficit reduction plan which he put in place last July was being achieved more quickly than expected.

"A substantial fiscal tightening has been achieved this year, with borrowing coming down by more than $17 billion... even excluding the windfall tax," he said.

He announced that long-term economic strength and stability were key goals of the Budget. "We must break from our history of stop-go and the false trade-offs between inflation and unemployment," he said.

He added that the Government aimed to have a stable and competitive pound in the medium term. "It would not be right to sacrifice long-term goals in the face of short-term pressures," he said.

Mr Brown highlighted the Government's and the Bank of England's determination to meet the inflation target, saying that action already taken meant inflation, which was heading towards 4% last May, was forecast to peak at 3% this year and hit the Government's 2.5% target in 1999.

Turning to growth, the Chancellor indicated it would depend on what happened to wage inflation over the coming year. He said if the Government's welfare to work reforms were complemented by responsibility across the economy, growth could reach 2.5% this year. Conversely, if wage bargaining proceeded in "the same short-termist way as in the past" then growth could slow to 2%.


  • Inflation: to peak at 3% this year and hit the Government target of 2.5% next year.
  • Growth: 2%-2.5% this year, 1.75%-2% next year and 2.25%-2.75% in 2000.
  • Borrowing: 5 billion for 1987-8; 4bn for 1998-9. Balanced by 2000.

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