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NEWS Tuesday, 9 March, 1999, 19:12 GMT
10p chancellor's election bid
Gordon Brown gave a barnstorming performance in the Commons
By Political Correspondent Nick Assinder

Gordon Brown has astonished MPs on all sides with a radical budget that cut taxes and set the government firmly on election footing.

In a barnstorming Commons performance, he introduced the long-awaited 10p starting rate of tax - and delighted his backbenchers by announcing it would come into effect immediately.

But he held his best shot until last, revealing only in the penultimate paragraph of his statement that he would cut the basic rate of tax for everyone from 23% to 22% next year.

His 65 minute-long speech was littered with goodies that made it sound like a pre-election give-away. And in many ways that is exactly what it was.

There are a series of crucial elections in Scotland, Wales, Europe and local councils this year in which Labour needs to avoid any mid-term loss of popularity.

So any feel-good factor encouraged by the statement will be welcome to Labour candidates.

And many of the tax cuts or boosts in spending announced by the chancellor will come into effect in April 2001, which is already pencilled in by Tony Blair as general election year.

And that left the tantalising prospect that, if he can do these things now, what may the 10p chancellor have up his sleeve for the 2001 Budget.

Sowing seeds

It was always going to be a crucial statement for Mr Brown, who had to balance the need to keep the economy on a sound footing while sowing the seeds for a pre-election feel-good factor.

He needed to reassure the City that he can still be trusted with the nation's purse strings, and businesses that he is still their new best friend.

He had to help families and the less well off while not spooking exactly the middle England voters that swept Labour to power at the last election and will be crucial to the next poll.

And he had to make serious strides towards fulfilling election pledges or risk the anger of his own backbenches.

Thanks to some careful planning and some discreet but giant tax rises in his last two Budgets, he appears to have pulled it off.

The City will like the pledge to keep inflation at 2.5% for the next three years, although it may cast a sceptical eye over his growth forecasts.

Businesses will welcome the changes to corporation tax and incentives for new enterprises.

Average families will be better off as a result of the changes to child support and the surprise announcement that he will not be taxing child benefit, although the higher earners may suffer as a result of the new "tapered" benefit.

Dramatic package

And all employees will be delighted by the tax cuts which will put extra cash into virtually everybody's pay packet.

The key problem of not frightening middle England was more difficult and the decision to abolish mortgage interest relief at source (Miras) could yet cause problems. But with interest rates at their current low levels, he may even weather that one.

Overall it was one of the most dramatic budgets seen in the Commons for years but it left some major questions unanswered - mainly where is all the money coming from.

Tory leader William Hague claimed much of the spending was already being paid for in tax increases levied over the past two budgets.

But he also predicted that the effect of some of the more technical elements of the package would also lead to another annual increase in the overall tax burden.

He put up a spirited performance but, with no time to analyse the package in advance, could do little more than attack the government for past tax increases.

In any case, Budget day is the chancellor's day - and Gordon Brown made the most of it. He milked every dramatic announcement and was rewarded with howls of approval from his own backbenches.

He even found favour amongst Old Labour MPs who detect and element of redistribution within the package.

The announcement will have massively boosted his personal standing and, if he has got it exactly right, will have given the government a major boost on its way to the next election.

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