British economy to 'see robust growth'

Britain's economy will continue to see robust growth and the government will meet its self-imposed rules on borrowing, Mr Gordon Brown, Chancellor of the Exchequer, told parliament yesterday in an upbeat assessment of Europe's second-biggest economy that defied independent forecasts.

In a pre-budget report on the state of the economy, the finance minister also unveiled generous measures - ranging from boosts in childcare and parental leave to a freeze on fuel duties and local government taxes - aimed at pleasing voters in the next general election, which is widely expected to take place next May.

Mr Brown said growth this year would remain on target at 3.5 per cent and be between 3 and 3.5 per cent in 2005.

Britain was "growing faster than many European countries" and government finances were in a healthier state than many of its competitors, he said.

The source of growth next year is expected to come from investment, government spending and a pick-up in exports offsetting a gradual slowdown in consumer spending, according to the pre-budget report.

Despite such claims, Mr Brown acknowledged that government net borrowing would be £4 billion (€ 5.8 billion) higher over the next two financial years than previously outlined.

But he asserted he had a big enough financial cushion to meet his own "golden rule" on borrowing, according to which the government can only borrow to invest.

"We are on course to meet our rules in this cycle and in the next cycle too," he said.

Meeting the golden rule is more important to Mr Brown's credibility than it is in strict economic terms as it is the measure by which the chancellor has always judged himself.

His forecasts drew predictable criticism from opposition parties and considerable scepticism from independent analysts and observers. Mr Oliver Letwin, finance spokesman for the Conservatives, said "the tide is going out on the chancellor's credibility" and accused Mr Brown of getting dismal value for taxpayers.

The International Monetary Fund and the Bank of England, the central bank, expect 2.5 per cent growth next year, while the Paris-based Organisation of Economic Co-operation and Development this week forecast growth of 3.2 per cent in 2004 and 2.6 per cent next year.

"His growth forecasts are extremely strong but we still think it's going to be a real challenge for him to meet his golden rule," said Mr George Buckley, an economist at Deutsche Bank AG in London.

Mr Brown announced a 10-year childcare strategy, saying it was "in the national interest to help parents meet their responsibilities". He said paid maternity leave would be extended from six to nine months and become transferable from mothers to fathers. There was an extension in free nursery care.