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Monday, March 8, 1999 Published at 13:26 GMT

Brown Budgets for the election

The Budget is looking forward to the next general election

By Political Correspondent Nick Assinder

Chancellor Gordon Brown is to unveil the most important Budget of the current government with a package of measures aimed at putting Labour on track for the next election.

Tony Blair has entered his mid-term - a period which is normally fraught with problems for a government - and he needs a Budget that will lay the groundwork for the next poll.

[ image: This is the big one for Gordon Brown]
This is the big one for Gordon Brown
The economy is proving remarkably resilient and the chancellor has much to crow about.

He has a series of Budgets, mini-Budgets and spending statements under his belt, all of which won him almost universal admiration. But this is a big one.

With probably only two years to go until the next election, the chancellor needs to strike a delicate balance between measures that will help fill the Treasury coffers and those that will induce a pre-election feelgood factor.

What seems certain is that there will be some controversial measures in the statement.

If there are unpalatable changes he wants to introduce, then he will not have another realistic opportunity before the election closes in.


[ image: Taxing child benefit is on the cards]
Taxing child benefit is on the cards
He has apparently already been persuaded to abandon plans to tax child benefit and abolish the married couple's tax allowance after warnings that would play into the Tories' hands.

He has announced that the package will be aimed at supporting families and children, raising speculation that he might even increase child benefit.

But it is highly likely he will abolish, or at least cut, mortgage interest relief at source (Miras) and there will be the usual increases in petrol and tobacco taxes.

His original plan to end the married couple's tax allowance would have brought about 1.7bn a year into the Treasury, but would also have stoked up Tory claims that the government is anti-family.

The opposition claim the move would have encouraged more couples to live together and bring up children out of wedlock.

[ image: A 10p tax rate is a Labour manifesto pledge]
A 10p tax rate is a Labour manifesto pledge
Another increase in petrol tax is seen as inevitable.

The government wants to force people out of their cars onto public transport and they will win applause from the environmental lobby while at the same time raising millions extra in tax.

Unfulfilled pledge

And there is still one key election pledge that remains unfilled - the promise of a lower income tax rate of 10p in the pound.

There is no doubt the chancellor can afford it. The public purse is bulging with cash at the moment and he can risk sloshing some of it around in a way that won't ignite inflationary pressures.

And with a few new tax increases in the Budget he will have plenty of room for manoeuvre.

The symbolic effect of fulfilling the 10p pledge would also be huge, particularly for those voters and backbench Labour MPs who are concerned about the government's direction.

So far Mr Brown has only been able to promise that the policy is still the government's long-term aim.

If he finally fulfills the promise it will represent a significant coup and delight his backbenchers.

And it need not be as expensive as many claim. That will depend on exactly where the band is set.

Looking after middle England

Every chancellor likes to have a surprise up his sleeve and this could be Gordon Brown's.

The Tories, however, will brand such a policy as a "stunt" which will help very few of the lowest paid.

The only possible dark cloud could be the effect the cumulative tax changes have on the vital middle England voters.

New Labour won power after convincing these people that they would not be penalised by a Blair government.

That could well change if they see themselves under attack from changes to Miras and other more discreet tax rises.

But that is exactly why the chancellor has to do these things now - he will need at least one more Budget to win back the middle classes with across-the-board tax cuts.

If he can do all that he may yet pull off the sort of trick previous chancellors could only dream of.

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