BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific
BBCi NEWS   SPORT   WEATHER   WORLD SERVICE   A-Z INDEX     

BBC News World Edition
 You are in: In Depth: Budget 2001  
News Front Page
Africa
Americas
Asia-Pacific
Europe
Middle East
South Asia
UK
Business
Entertainment
Science/Nature
Technology
Health
-------------
Talking Point
-------------
Country Profiles
In Depth
-------------
Programmes
-------------
BBC Sport
BBC Weather
SERVICES
-------------
EDITIONS
Budget 2001 Wednesday, 7 March, 2001, 16:31 GMT
Strong economy leaves scope for tax cuts
The strong economy will boost budget surpluses
Gordon Brown promised the country that he could deliver both economic stability and tax cuts.

The chancellor told the Commons that a strong economy would help ensure prosperity for all.


He has kept the profile for public sector net debt still relatively tight

Adam Chester, Halifax
"By striking the right balance today between long-term investments and affordable tax cuts, we not only boost enterprise and savings but meet the needs of not some but all of Britain's families," Gordon Brown said.

But for the Conservatives, William Hague said that the Labour government had raised taxes by 10p in the pound, before lowering them by 1p in this Budget.

And Charles Kennedy, for the Liberal Democrats, said that education, public transport and crime had all become worse over the last few years, while the Chancellor was devoting five times as much to tax cuts as spending increases.

Strong economy

Mr Brown promised that within a stable economic framework, targeted tax cuts and increased public investment could be afforded.


We not only boost enterprise and savings but meet the needs of not some but all of Britain's families

Gordon Brown
He said that the government's first duty was secure economic stability - and that his tough controls on borrowing and spending had been necessary to prevent the economy falling into recession.

He said the country had the lowest inflation in 30 years and the lowest unemployment since 1975, while mortgage rates were lower and growth rates higher than at any time in the last 20 years.

And he predicted that the economy would grow by around 2.5% next year, in line with projection by independent economists, despite the slowdown in the US and Japan.

"There is quite clearly a very strong mix of populism being dressed up in prudence," said political analyst Professor John Curtice of Strathclyde University.

Lower debts

The chancellor said the inflation target would remain at 2.5%, while the strong economy would boost the public finances and allow the government to repay debt.

This was more debt repaid in one year than British governments had repaid in the last 50 years, he said.

"It is a new-won stability... which Britain must not take for granted but must entrench," he said.

As a result, public spending would be lower than expected, with the current surplus some 6bn higher than expected at the time of the last Budget.

Mr Brown did not change his predictions that the surplus would gradually disappear as public spending increased over the next few years.

Most analysts said that the chancellor had stuck to his tough fiscal targets.

"He has kept the profile for public sector net debt still relatively tight. Overall, from what he has said so far, he hasn't let loose any major loosening," said Adam Chester of the Halifax.

Mr Brown's tough fiscal stance could lead to more interest rate cuts by the Bank of England, which is already meeting to consider further rate cuts - with an announcement expected at 1200GMT on Thursday.

And Mr Brown predicted that inflation would be below target at 2.25% this year, while reaching his 2.5% target next year.

Targeted tax cuts

The chancellor used much of his Budget surplus to provide more money for families with children.

"Financial help for children has never been higher," he told the Commons.

Mr Brown announced a rise in targeted benefits to help parents in low-paid jobs.

Under the Working Families Tax Credit, all families would be guaranteed 220 per week, while child care costs of up to 200 would now be met.

And he increased the children's tax credit to 10 a week - giving families tax relief worth 520 per year.

Maternity pay was being increased in stages to 100 per week, while fathers would receive two weeks paid leave.

And there will be 1,000 per year "baby credit" payable from next April.

Millions of taxpayers would benefit from the 1bn increase in the 10p tax rate.

"He is mixing traditional Labour values with quite substantial tax cuts," said Professor John Curtice.

The changes would benefit the average household by 4 per week, and would take the average person's direct tax burden since 1997 from 21% to 18%, Mr Brown said.

That figure was disputed by Opposition leader William Hague, who said that taking into account all taxes the tax bill was 25bn higher than when Labour came to power.

And John Whiting of accountancy firm PriceWaterhouse Coopers said that Chancellor's failure to index the higher rate band, which will now start at 29,400, amounts to a stealth tax as more and more people will be brought into higher tax bands.

More spending

The chancellor announced another 2bn in public spending, 1bn each to health and education.

That would raise spending by 3.7% per year over the next three years, instead of 3.4%.

Mr Brown criticised the Conservative plans to cut spending increases to 2.25% annually, saying it would lead to budget cuts of 10bn by 2003-4.

But Mr Brown's extra public spending is not all that it seems.

The 2bn is spread over three years, so health and education only get around 300m per year in additional funds.

And according to the government's published figures, this is more than outweighed by some 1bn of extra money that has not been spent in the past year.

 WATCH/LISTEN
 ON THIS STORY
Chancellor Gordon Brown
"It is this Government that has raised the minimum wage"
Lib Dem leader Charles Kennedy
"We have had persistent under funding in vital public services"
Opposition leader William Hague
"To suddenly turn up today with tax reductions is a cynical election budget"

Key stories

Spending and saving

Analysis

AUDIO VIDEO

INTERACT

TALKING POINT
See also:

01 Mar 01 | Budget 2001
01 Mar 01 | Budget 2001
20 Feb 01 | Business
Internet links:


The BBC is not responsible for the content of external internet sites

Links to more Budget 2001 stories are at the foot of the page.


E-mail this story to a friend

Links to more Budget 2001 stories

© BBC ^^ Back to top

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East |
South Asia | UK | Business | Entertainment | Science/Nature |
Technology | Health | Talking Point | Country Profiles | In Depth |
Programmes