Closer inspection reveals the giveaway in 2004/2005, with 475m aimed at over-70s


Closer inspection of the UK Treasury's background literature shows that today's budget represents a 725 mln stg giveaway to taxpayers in 2004/5.

In 2005/6, the budget measures announced today mean government coffers will swell by 65 mln stg, followed in 2006/7 by a further 170 mln reward to taxpayers.

'Basically the budget measures are neutral, slightly giving money away in the coming year,' said Ed Balls, chief economic advisor to Chancellor Gordon Brown.

The biggest cash give-away for the coming year is the 475 mln extra payment to over-70s to help them pay for escalating local government bills.

That measure only lasts a year, according to the Treasury's Red Book, which accompanies the budget statement from the Chancellor.

Another expansionary measure for the coming year is the Chancellor's plan to introduce a differential between sulphur free and other main road fuels.

On the debit side, there are higher Treasury revenues stemming from higher value added tax payments.

Balls said there is no need for the government to raise taxes as strong economic growth will help bring deficits down over the years ahead.

'We are a low debt country, we can let the automatic stabilisers work, we can borrow to invest,' he said.

'At the end of the period we've got low debt, it all adds up.'

Brown announced only minor revisions to his borrowing forecasts

He reiterated the forecast in last December's pre-budget report that public sector net borrowing in 2004/5 would be 37 bln stg.

In the following two years, he raised his PSNB forecasts slightly.

In 2004/5, he is predicting a shortfall of 33 bln stg against the 31 bln forecast made in the pre-budget report, followed in 2005/6 by a deficit of 31 bln stg, up 1 bln on the previous forecast.

Ball said increases in borrowing for the next two years are the result of natural adjustments to overall government spending.

'Fundamentally the fiscal stance and the fiscal figures are pretty much the same as they were at the time of the pre-budget report,' said Balls.

The main mechanism behind the lower borrowing over the coming years will be faster growth in the UK economy.

Brown once again lauded the fact that his much-derided economic growth forecasts were met, and met easily.

Economists spent most of last year deriding Brown's forecast of 2.0-2.5 pct growth, and were equally dubious about his 3.0-3.5 pct forecast for both 2004 and 2005, reiterated today.

But in the end, the UK economy expanded 2.3 pct last year and economists have been quick to push their forecasts for the coming two years up into Brown's range.