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Tuesday, November 9, 1999 Published at 19:09 GMT

UK Politics

Brown's pre-Budget rabbits

By political correspondent Nick Assinder

Chancellor Gordon Brown has a reputation for pulling rabbits out of his Treasury hat - and his third pre-Budget statement was no exception.

The man Tony Blair loves to describe as the "iron chancellor" gave no ground to the public sector unions and insisted he would not relax his rigid grip on spending.

And he painted a rosy picture of Britain's economic future, marked by low inflation and increasing living standards.

But, while maintaining his image, he offered significant tax incentives to businesses and extended the radical policy of ring-fencing certain tax increases to fund specific policies.

He also salted away billions of pounds for his so-called election "war chest" which will give him the opportunity to relax public spending in the run up to the next general election.

But the biggest bunny to come out of the hat was new handouts to pensioners.

Headline grabbing

The £100 winter fuel allowance will now be paid every year and - in an announcement clearly aimed at capturing the newspaper headlines - he abolished the £101 a year TV licence for over 75s.

But his apparent generosity did little to pacify pensioner groups who, just minutes later, were told by Social Security Secretary Alistair Darling that their annual pension increase will be pegged at just 75 pence a week because of the low level of inflation.

[ image: Daily sign on for jobless]
Daily sign on for jobless
The policy had already caused an uproar amongst pensioners groups who claimed it was penalising some of the poorest in society.

And, after Mr Brown's statement, they claimed the government had attempted to divert attention away from the tiny pension increase by offering headline-grabbing policies that, in the case of the TV licence, will only affect a small proportion of them.

Mr Brown also hinted at a hard-line new policy on the jobless, suggesting that anyone suspected of benefit fraud would be made to sign on every day, rather than weekly at present.

That brought howls of derision from Tory MPs who pointed out this was one of their polices which Labour had previously dismissed as excessively right wing.

He also came under attack from some Labour backbenchers who claimed his handouts to encourage businesses came at the same time the government was pushing through cuts to incapacity benefits.

Smoking taxes

In a surprise move he announced that, in the future, smokers will put an extra £300m into the NHS through tax increases, while motorists will pay for road improvements directly through fuel price increases.

"Hypothecation" of taxes has long been demanded by the Liberal Democrats but been resisted by both Labour and Tory governments.

The New Labour government now appears to have embraced it and will come under increasing pressure to apply it to other areas of taxation, particularly on health and education.

The chancellor also abolished the much-criticised fuel tax escalator - the subject of mass demonstrations by truck drivers - and he extended the "New Deal" job creation package to include over 25s.

Despite all the criticisms, however, his mini-budget went down well with the majority of his own MPs.

And it appeared to do nothing to undermine the economic stability the government is banking on winning it the next election.

The major question which still remains unanswered, however, is whether the Chancellor will be able to resist the temptation to start spending money in the run up to the next general election.

That will probably be determined by calculations about Labour's chances of winning that vital poll.

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