Brown beats his economic forecasts

THE Chancellor painted a robust picture of economic growth as he presented his 2005 Budget today. Gordon Brown said that no part of the UK had not benefited from recent economic growth.

Chancellor Gordon Brown said he wanted to strike a balance between tax cuts, investment and stability. Brown defied most of his critics by producing figures showing that the UK will continue to grow by more than its long-term average this year.

The Chancellor slated critics who suggested last year that economic growth would fail to meet expectations in 2004 by pointing out that it had come through in line with projections at 3.1%.

Referring in passing to Arsenal Football Club, which achieved 49 matches on the trot without a defeat but broke its record in its 50th match, the Chancellor said the UK had enjoyed its 50th consecutive quarter of growth and would go on to further growth.

Economic growth of 3%-3.5% this year and 2.5%-3% next year compares favourably with Japan, where it is less than 1%, and elsewhere in Europe where the average is just 1.5%.

Brown also said that he expected inflation to remain steady, with the consumer price index at 1.75% this year, and will remain at 2% in the years ahead. The Bank of England is tasked with targeting an inflation rate of 2%.

Meanwhile, Brown said business investment will rise by between 4.25%-4.75% this year, while exports will increase by more than 6%.

The Chancellor's confidence about the growth outlook underpins his continued belief that he will meet his fiscal rules, in particular his 'golden rule' of balancing the budget, excluding investment, over the course of the economic cycle, expected to end in 2005-2006. He stuck to his forecast that public sector net borrowing in 2004-2005 will be £34bn, falling to £32bn, £29bn, £27bn, £24bn and £22bn in the years ahead.

As a result, Brown said the Gvernment has a margin of £6bn over the rest of this economic cycle to meet the golden rule. That is slightly below the £8bn margin he predicted in the Pre-Budget report.