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EDITIONS
 Wednesday, 24 April, 2002, 16:13 GMT 17:13 UK
Brown defends Budget's prudence
Gordon Brown was upbeat on the future of the UK economy as he testified to Parliament on his April Budget - which raised taxes to fund improvements in the National Health Service.

He said he was confident that economic growth would be stronger than previously thought, sticking to his forecast of 3-3.5% growth next year.

I have kept all the promises I have made and my party has kept all the promises it has made on tax at the time of the election

Gordon Brown
Mr Brown told the Treasury select committee that the higher growth in 2003 would make it easier to raise taxes (such as National Insurance) without jeopardising the economic recovery.

He added that independent forecasters were moving to agreement with the Treasury forecast, and said that growth in the major industrial countries - especially in the United States - would be stronger than previously thought.

Mr Brown would not be drawn on whether or not the government wanted to lower the value of the pound, which many manufacturers believe to be hurting their exports.

"We want a stable and competitive pound," he said, adding that the weak euro was the main cause of the problem.

Mr Brown also denied that the increase in employers' National Insurance would hurt jobs - as claimed by business organisations.

He admitted that he had made no estimates of the employment effects of his measures, but said that he expected the economy to keep adding jobs in the future as growth accelerated.

Public finances under pressure

Mr Brown confirmed that the big savings to the public finances - due to falls in unemployment and the huge cut in public debt - have largely been played out.

During the next Parliament, "there is not enormous scope for huge additional sums of money" from these areas, Mr Brown told the committee.

Debt repayments had already fallen by 7bn yearly, and lower unemployment saved 4bn compared with the year Labour came to power.

And he said that his figures would meet Europe's stability and growth pact -"on a prudent interpretation of the Growth and Stability Pact not taken by the European Commission but by the European Council of finance ministers".

Earlier in the day, the European Commission had criticised the UK for its growing Budget deficit and urged it to keep the Budget in surplus or balance.

Countries in the eurozone are required to keep their budget deficits below 3% of gross domestic product, but Mr Brown said the target should take account of the overall size of the government's debt, whether the economy was in recession, and the need for public investment.

Mr Brown was pressed on whether his commitment to the private finance initiative was building up "contingent liabilities" which might eventually have to be funded by the Treasury - but refused to give a figure.

Tax burden

For the Conservatives, David Ruffley, a former adviser to Kenneth Clarke, pressed the Chancellor to admit that taxes were now rising - and what proportion of the rise in taxation was due to policy changes.

But Mr Brown said it was impossible to calculate in detail how much was due to changes in the economy.

And he denied there was a 7bn "black hole" in public spending after 2005-06, which might be needed to fund further increases in spending in the National Health Service.

He said all the spending plans were "covered", but he said he would not rule out future tax changes - "as no Chancellor would ever do."

And he said he had kept to his promises made during the General Election - when he specifically refused to rule out increases in National Insurance.

"I have kept all the promises I have made and my party has kept all the promises it has made on tax at the time of the election," he told the committee.


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18 Apr 02 | Business
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