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Rosemary Radcliffe, PwC
"Economic conditions are much more favourable"
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Wednesday, 23 February, 2000, 17:52 GMT
Brown's health spending shortfall

gordon brown
Gordon Brown is mulling over his Budget options

In spite of his reported bumper war chest, Chancellor of the Exchequer Gordon Brown is going to struggle to meet increased spending demands on health, education and transport, according to accountants PricewaterhouseCoopers (PwC).

Britain's economy is set to grow strongly in the next two years. PwC said the rate of economic growth would increase from 2% in 1999 to an average of about 2.75% in 2000 and 2001.

However, it says the government will still struggle to meet increased spending needs.

PwC's calculations suggest that the government's five-year objective of increasing British health spending to the EU average could turn a projected 10bn budget surplus in 2004-5 to a near-10bn deficit.

Such a massive overspend would scupper Mr Brown's self-imposed golden rule of borrowing only to invest, PwC said.

Looking ahead to the March Budget, PwC forecast that this year's surplus should be at least 12bn compared with the 9.5bn estimated in the chancellor's pre-Budget report in November.

PwC's chief economist Rosemary Radcliffe told the BBC this was a "reasonable cushion" to operate within this year, but not a huge margin when the expected spending claims were taken into consideration.

Based on his prudent record to date, she said she expected the chancellor not to give too much money away in the form of net tax cuts this year.

Industrial recovery

PwC said its analysis showed that some sectors of industry would recover more quickly than others.

Pharmaceuticals and telecoms companies are likely to lead the way, with metals and textiles firms lagging behind.

It says manufacturers will see their output accelerate from last year's standstill to about 2.5% in 2000 and more than 3% the following year.

The north-south divide will also narrow, PwC forecast. Over the past five years, the South of England has seen its economy thrive while the North and Scotland have lagged behind.

But in the year ahead, manufacturing industry, largely based in the North, is expected to pick up and new companies in the thriving service sector will continue developing in cities like Leeds and Manchester.

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See also:
26 Jan 00 |  Business
Brown's 7bn war chest
07 Feb 00 |  Business
'Outlook rosy' for UK economy
11 Feb 00 |  Business
TUC calls for more spending

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