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EDITIONS
Wednesday, 27 November, 2002, 19:49 GMT
Brown puts UK 20bn in the red
Brown: UK economy 'well-placed amid slowdown'
A huge increase in government borrowing has been unveiled by Chancellor Gordon Brown to cover extra spending on schools and hospitals.

Borrowing this year will almost double to 20bn, with the government set to borrow a total of more than 100bn in the next five years.


Revealing his pre-Budget report to MPs, Mr Brown also admitted for the first time that he had downgraded his hopes for UK economic growth.


We can fulfil our spending plans and borrow for investment

Gordon Brown

Shadow Chancellor Michael Howard said it was "the downgraded forecasts of a downgraded chancellor".

But Mr Brown said that amid a world economic slowdown he expected the UK economy to expand 1.6% this year, compared with his forecast in April for growth of between 2% and 2.5%.

The Liberal Democrats warned Mr Brown to stop relying on consumer spending to support the economy and do more to support manufacturing industry.

Tax breaks for childcare?

Government borrowing has reached 10.3bn so far in the 2002/03 financial year, after lower than expected tax receipts, against a forecast of 11bn for the full year.

In his toughest test as chancellor, Mr Brown said borrowing in the year would be 9bn greater than earlier forecast.


There is a black hole in the public accounts, a hole entirely the making of this chancellor

Shadow Chancellor Michael Howard

And borrowing over the next five years would increase by 28bn on his April forecast to 102bn.

But Mr Brown sought to sugar the pill, saying the government would publish proposals to allow parents more scope for balancing work and family life.

New tax and national insurance incentives to expand employer childcare would be considered, as well as proposals to allow more people access to childcare credit and give parents more time off work.

Tough message for firefighters

The chancellor delivered a tough message to firefighters and other workers demanding pay rises.

"To continue to set a steady course we must hold firm in our demand for discipline," he said.

Mervyn King
Mervyn King will be the Bank of England's next governor

With inflation at 2%, the government could not yield to "inflationary and unjustified pay settlements," Mr Brown said.

Mr Brown also announced plans to consult on a much-trailed proposal to increase landfill tax by 3 per metric ton a year from 2005/06.

And there will be a cut in duty on environmentally-friendly fuels.

King succeeds George

The chancellor also announced measures aimed at helping small and medium-sized businesses.

And he revealed that the deputy governor of the Bank of England, Mervyn King, would succeed Sir Edward George as governor on his retirement.

The chancellor also announced

  • A new "International Finance Facility" to provide $100bn of development aid
  • Possible child trust funds
  • Abolition of royalty taxes on North Sea oil and gas from 1 January
  • Scrapping of bingo duty from Budget day

'Hard-won stability'

Mr Brown defended his borrowing plan, saying: "We can comfortably meet our fiscal rules, we can fulfil our spending plans and borrow for investment across the economic cycle."


Your Budget will go bust in the long term unless you tackle the collapse in British industry

Matthew Taylor
Liberal Democrats

He said cutting spending and borrowing would have lead to "depressed demand, rising unemployment... capital investment being slashed and hard-won stability being put at risk".

Mr Brown said the UK economy remained one of the fastest growing last year despite the worst worldwide economic slowdown for almost 30 years.

And he said that, along with the US, it would continue to grow next year as others struggled.

'Strongest, not weakest'

"Some have argued that Britain is least well-placed to cope with global slowdown. In fact taking growth last year, this year and next year together, Britain is not the weakest but the strongest of the major economies," the chancellor said.

Ending his speech, Mr Brown said he would continue the government's "steady strength of purpose".

He said he would meet commitments on spending to improve public services while also working to "meet and master the global challenges".

'Running out of money'

Shadow chancellor Michael Howard said Mr Brown was engaging in "Enron-style" accounting.

He said that if off-balance-sheet liabilities of 100bn were included, borrowing was set to pass the chancellor's own limits.

Mr Howard said: "There is a black hole in the public accounts, a hole entirely the making of this chancellor."

Liberal Democrat spokesman Matthew Taylor accused the chancellor of "running out of money and running out of ideas".

He said it was right to borrow to cover "a temporary setback".

But he warned: "Your Budget will go bust in the long-term unless you tackle the collapse in British industry and stop relying on an unsustainable boom in consumer debt to keep your growth figures up."

 WATCH/LISTEN
 ON THIS STORY
The BBC's Andrew Marr
"For the first time the chancellor's budget figures have not quite added up"
The BBC's Evan Davis
"His excuse is it is a global problem, not a British one"
Chancellor Gordon Brown
"We will tolerate nothing that will put hard-won economic stability at risk"

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TALKING POINT

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Launch AT-A-GLANCE
 VOTE RESULTS
Has the chancellor managed the economy well?

Yes
 52.21% 

No
 47.79% 

6639 Votes Cast

Results are indicative and may not reflect public opinion

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