Brown's Budget bid for votes

GORDON BROWN today drew the battle lines for the next General Election with a Budget pledging to spend billions on key public services - despite the risk of tax rises to come.

Hours before his Budget speech, the Chancellor told the Evening Standard that one of his prime aims was 'to increase investment in the nation's economic future and in our frontline services'.

Senior sources elsewhere in Whitehall said the overriding aim of an electioneering package would be to open up 'clear water' with the Tories over how much to spend on the NHS, schools, transport and crime-fighting.

With an election widely expected next spring, there were growing hopes that Brown would leave prime revenue-raising targets - such as an increase in stamp duty on house sales - alone for now.

For the same reason, there was a strengthening belief at Westminster that drinkers and smokers would be spared any hefty, inflation-busting rises in 'sin taxes'.

The City was braced, however, for a big new attack on tax loopholes. This would raise hundreds of millions in revenue for the Chancellor but looks likely to expose him to fresh charges of taxing by stealth.

Top of the list was a move to scrap a concession granted two years ago to free small businesses from corporation tax on profits of less than £10,000. To the dismay of the Treasury, thousands of self-employed set themselves up as small companies to save almost £3,000 a year in tax.

Another target was inheritance tax and the practice of parents 'giving' their home to their children while continuing to live there.

Brown was set to proclaim the usual crop of small-scale 'good news' announcements. And he was lined up to spend extra millions on childcare and investment in science.

But Labour MPs were hoping for something more substantial to kick-start the General Election campaign.

Brown, in his eighth Budget, was all set to trumpet a strong economy which had weathered the recent global chill. But critics were pointing out that he had much less to crow about over borrowing, where his original low estimates had climbed by billions.

And the Tories are warning that the combination of higher spending without enough money flowing in was a recipe for 'Labour's third term tax rises'.

The Chancellor, however, told the Evening Standard: 'My Budget will seek to lock in an enduring economic stability for Britain.' He said it would 'set out the long-term choices and reforms we intend to make to increase investment in the nation's economic future and in our frontline services'.

The aim, he said, was to 'secure prosperity and security for all, and to ensure Britain is well placed to prosper'.

At the top of his spending list, Brown was poised to confirm a massive increase in resources for the NHS to send the total climbing from £72bn this year to more than £105bn by 2008.

Brown has already warned that the high rate of spending of the last few years, increasing at an annual 4.5%, must come down in future to around 2.5%. But he will insist that the commitment is massively more than the Conservatives would provide should they come to power.