Brown would be wonderful PM, says Blair

Tony Blair today moved to patch up his relationship with Gordon Brown, heaping praise on the Chancellor and dismissing City doubts about the pre-Budget report.

The Prime Minister will use a key speech in Edinburgh tonight to go even further, congratulating Mr Brown personally for Britain's economic success and saying his achievements are a "cornerstone".

In an interview, Mr Blair also said he had "absolutely no doubt" that his colleague had the makings of an " excellent Prime Minister".

Mr Blair's olive branch followed-Westminster gossip that their feud had worsened since the Cabinet reshuffle when Mr Brown's election role was given to Alan Milburn. Some Downing Street strategists are keen to mend fences, realising they cannot let the row fester.

In his Edinburgh speech Mr Blair will say Labour's key themes are to be economic stability, opportunity and security - a phrase which puts greater emphasis on Mr Brown's achievements. And confirming that a spring election is on the way, he will say a "decisive moment" has been reached in British politics.

The backing for Mr Brown came as the City reacted with scepticism to his pre-Budget report, which offered ?2 billion-of election sweeteners. Despite the Chancellor's claims that continued growth would prevent a "black hole" in his accounts - and stave off the threat of tax hikes - forecasters were pessimistic.

Michael Taylor, of bankers Merrill Lynch, said it was "hard to see" how growth could continue at the same rate, putting tax receipts and spending out of kilter.

"He will have to face up to the fact that to meet his rules he will have to raise taxes. Most commentators estimate he will have to raise taxes by ?10 to ?12 billion."

David Page of Investec Securities said: "His forecast that he will meet the golden rule with a margin of ?8 billion is way too optimistic."