The countdown to the general election began yesterday, only seven months after the last one, when Gordon Brown drew the battle lines for his expected contest with the new Tory leader David Cameron.
In his pre-Budget report, the Chancellor raised his tax take from North Sea oil by more than pounds 2bn a year, helping him to balance the Government's books in two years, by which time he hopes to be Prime Minister.
The move, combined with a tight squeeze on future public spending, could also enable him to avoid the income tax increases that the Tories claim are inevitable. By the 2009-10 financial year, the most likely time of the next election, Mr Brown forecast that the public finances will be pounds 11bn in surplus.
Mr Brown acknowledged it had been his 'toughest and most challenging year' as he halved his forecast for growth this year from a maximum 3.5 per cent to just 1.75 per cent and increased borrowing from the pounds 31.9bn he predicted in March to pounds 37bn. But he still found room to announce that the pounds 200 winter fuel payment for pensioners will continue until the next election, outline plans to install central heating and insulation in the homes of old people, and pledge to build more homes " particularly for first-time buyers " and maintain the freeze in petrol duty.
Mr Cameron, the shadow Education Secretary, is expected this afternoon to become the Tories' fifth leader in eight years. The result of the ballot of the party's 250,000 members, which closed yesterday, is likely to give him a comfortable victory over his rival David Davis.
Yesterday's Commons statement by Mr Brown began a new era in politics " he clearly had Mr Cameron in his sights. The Chancellor mocked Mr Cameron's economic strategy, 'sharing the proceeds of growth' between public spending and tax cuts, warning it would have meant spending pounds 12bn less this year and pounds 19bn next year. Signalling that the
choice between Labour investment and Tory spending cuts would be a key election battleground, he said Mr Cameron's 'rebranded' policy was a 'a new gloss on an old proposal' that would undermine Britain's public services, infrastructure and economy.
At the same time, Mr Brown stole some Tory clothes by announcing a scheme to enable young people to take a gap year after school to do voluntary work in Britain or abroad, financed partly from the more than pounds 500m left unclaimed in dormant bank accounts for 15 years. That mirrored plans set out by Mr Cameron last week for a national school-leaver programme.
In a foretaste of the battle ahead, Mr Brown locked horns in the Commons with another young Tory turk, the 34-year-old shadow Chancellor, George Osborne, who is Mr Cameron's closest political ally and ran his leadership campaign. Mr Osborne won plaudits from Tory MPs for a highly personal attack on the Chancellor but Labour MPs said Mr Brown exposed the inexperience of his opposite number when he hit back.
The new generation of Tories sense a chink in the armour of the 'Iron Chancellor' that they believe will dent his prospects of leading Labour to a fourth successive election victory. Mr Osborne said the lower than expected growth this year showed his reputation was 'crumbling' and made clear the Tories would portray him as a figure of the past.
Mr Osborne added: 'The country needs a chancellor who is interested in reforming Britain for the future not in defending his failed policies of the past. But this Chancellor is the roadblock to reform, a Chancellor from the last century who has run out of ideas.'
The small print of the pre-Budget report suggested Mr Brown would impose a tight rein on public spending after a wholesale review in 2007 that will map out Labour's programme for the next 10 years. He has pencilled in an overall spending rise of 1.9 per cent a year, less than the …