A prudent and targeted giveaway in British budget

For a pre-election Budget, yesterday's British affair was almost parsimonious, certainly by the standards of recent Irish Budgets.

Over the course of an hour the Chancellor of the Exchequer Mr Gordon Brown managed to give away £3.8 billion sterling (€6 billion) but the giveaways were all strictly targeted and he refused to abandon his Presbyterian parsimony, although he was more generous than in any of his previous budgets. Many in the UK had been expecting a package of well over £4 billion.

As Mr Colin Hunt of Goodbody Stockbrokers put it: "Prudence is still his guide."

He says if revenue buoyancy is taken into account, this Budget could even be sold as a tightening of policy. Budget surpluses are predicted to run at higher levels than ever before. This year, Mr Brown forecasts a surplus of £23 billion sterling, up from an estimate of £14 billion. In the next fiscal year, the surplus is estimated to fall to £17 billion.

However, the European Commission is unlikely to take this seriously and it may be readying for another broadside against Mr Brown. It had warned that projected budget deficits in 2003-04 and 2004-05 would not be in line with the EU's stability and growth pact. The Chancellor took the opportunity to highlight the successes of Labour's four-year term. "Our country now has the lowest inflation for 30 years, the lowest long-term inflation for 35 years . . . more people in work than ever before, and the lowest unemployment since 1975."

Despite the giveaway, the Bank of England may find it will be in interest-rate-cutting mode. The Chancellor kept excise duties on all alcohol steady and raised cigarette prices by only 6p, in line with inflation. As a result, British inflation could fall to the bottom of the Bank of England's target range at around 1.5 per cent - and rate cuts could follow.

The only really general tax cuts were a small widening of the tax band, which will target lower earners and those aimed at families with children.

Childcare credits were increased dramatically - up to £200 a week for many families with two children. Maternity pay was increased as was the time period - to 26 weeks from 18 weeks - while a two-week paid paternity leave was introduced. A special payments for babies under a year old, which will amount to as much as £20 a week, was also part of the package. The Chancellor also won cheers from his own benches when he announced the Government would this year pay off more debt than the combined governments of the previous 50 years had managed. He has now achieved his target of getting the debt to GDP level below 40 per cent. Last year around £9 billion was repaid but this year Mr Brown has targeted a £34 billion repayment.

In some ways, it could also have been a Budget Mr McCreevy would be happy to deliver. Betting tax was abolished in a bid to bring the offshore industry back to Britain while "Enterprise Britain" was looked after. The Chancellor extended the amount of share options eligible for favourable tax treatment. He also cut employees capital gains tax to 10 per cent.