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Last Updated:  Wednesday, 9 April, 2003, 14:06 GMT 15:06 UK
Gordon Brown, the risk taker

Analysis
By Jenny Scott
BBC economics correspondent

The Chancellor previously known for his prudence is fast gaining a reputation for risk taking.

In a Budget that was thin on individual measures, the focus will inevitably fall on his projections for the economy and government borrowing - and both look rather optimistic.

The Chancellor is banking on a healthy economic recovery to bail him out of difficulty.

He has lowered his growth forecast for this year by half a percentage point to 2.0 to 2.5%. However, he's left next year's forecast at 3.0 to 3.5%, and is expecting a similar show of strength in 2005.

Double or quits

That has enabled him to announce only relatively small increases in government borrowing - during the next three years a rise of around 12bn over and above what he expected to borrow last November.

In effect, he's deferred all the difficult decisions about possible tax rises for a later date.

It's double or quits.

In some ways, that's understandable - the war in Iraq has clouded the economic outlook, making it an awkward time to announce any bold measures.

In addition, any increase in taxes now could knock growth when it's particularly vulnerable.

Giving with one hand, taking away...

Traditional economic theory would advocate loosening fiscal policy when growth is weak, not tightening it.

And indeed, today's budget is giving away a net 500m, mainly in the form of Child Trust Funds.

Beware, however, of a touch of political trickery here.

The increase in National Insurance contributions announced in last year's budget only took effect this week - more than wiping out that small gain.

Best case scenario

Another problem Mr Brown may encounter is disappointing tax revenues.

Among the measures announced in this year's Budget were initiatives to crack down on tax avoidance - revenues that are notoriously hard to predict with any accuracy.

In short, this is a budget based on optimistic assumptions about growth and borrowing, which allow the Chancellor to delay difficult decisions on whether to raise taxes.

That's understandable given the cloudy economic outlook, but it may nevertheless be something that comes back to haunt Mr Brown in the years to come.





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