Newspaper article The Evening Standard (London, England)

City Shrugs off Brown Borrowing Blowout

Newspaper article The Evening Standard (London, England)

City Shrugs off Brown Borrowing Blowout

Article excerpt


GORDON Brown's blemished reputation for prudence suffered a fresh blow today as he admitted public finances were set to plunge much deeper into the red.

But, in a typically pugnacious show of confidence, the Chancellor trumpeted his handling of the economy and insisted a pickup in tax receipts would pay for the Government's huge injection of cash into public services without hefty tax increases.

With no big surprises from Brown, financial markets were unfazed. The FTSE 100 was down 59.5 points at 4320.1, while gilts took the larger borrowing figures in their stride and held earlier gains.

Brown forecast in April's Budget that the current financial year would see public sector net borrowing of [pounds sterling]27 billion.

Today, in his Pre-Budget Report, he admitted borrowing of around [pounds sterling]37 billion was more likely, bringing him in line with the consensus City view. The [pounds sterling]24 billion forecast for next year was bumped up to [pounds sterling]31 billion.

Borrowing for subsequent years was put at [pounds sterling]30 billion, [pounds sterling]27 billion and [pounds sterling]27 billion again.

But Brown insisted he would not breach his own fiscal rules, crucially his so-called Golden Rule which allows borrowing only to invest over the business cycle, not to fund current spending. That means headlinegrabbing tax rises can be saved for another day, probably after the next general election.

The Chancellor argued Britain has coped with the global economic downturn better than most countries and was able to stick with his existing growth forecasts. He sees the economy expanding 2.1% this year and by 3% to 3.5% in 2004 and 2005.

"While America, Japan and half the euro area have suffered recessions, the British economy has - uniquely - grown uninterrupted, free of recession, for every single quarter and every single year since 1997," he said. "And now is the the time for this stable and growing economy to seize the opportunities of the emerging world recovery. …

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