Pre-Budget boost for Brown

CHANCELLOR Gordon Brown's prudence has given Britain the strongest public finances since the beginning of the last century, says the Bank of England. In the year ended in March, net Government debt as a proportion of total output plunged to 31.6%, the lowest figure since 1992.

Over the 12 months, this debt fell by £34bn or 9.9%. Most of the fall was due to the proceeds from the mobile phone licence auction.

The Bank says that debt is now low by historical standards and that over the last two decades it has fallen to levels not seen since before 1914 and two world wars.

The healthy state of the public finances will be a boost to the Chancellor ahead of the his pre-Budget report, which he delivers on Tuesday. It will be made against the background of a weakening economy. Last week the Organisation for Economic Co-operation and Development warned that growth in the UK will slip to 1.7% in 2002.

The Bank notes that even after taking account of the £22.5bn earned from mobile licences the fall in debt was the largest for more than a decade. The relatively low level of Britain's debt as a proportion of gross domestic product and the small amount held in foreign currency - just £7.7bn - means that the Bank has no concerns about the nation's 'financial fragility' at present.

It also means that the Chancellor has plenty of room to meet the emergency costs of the war in Afghanistan and to press ahead with broadening his programme of tax credits for children, pensioners and older people who have had trouble re-entering the workforce.