Brown to raise green taxes in his final budget

Gordon Brown has raised new taxes in probably his last pre-budget report as chancellor, setting the spending or "investment" priorities for the government he hopes to lead by next summer.

In anticipation of his expected election clash with Conservative leader David Cameron, Mr Brown yesterday sought to establish his own "green" credentials - by ending the freeze on fuel duty and doubling the current £5 (€7.40) tax on air travellers.

However, Christian Aid's climate change analyst Andrew Pendleton accused Mr Brown of adopting a "horrifyingly piecemeal" approach to the challenge of global warming and of "fiddling around the edges".

Mr Brown's Conservative shadow George Osborne, meanwhile, insisted the new revenues should be a replacement for other taxes and not additional to them. And he set the stage for the political battle ahead by denouncing the chancellor as a "big" but not a wise spender, while linking him to the "spin" of the Blair years.

"The truth is that Labour can only be new once," declared Mr Osborne, "and if the public want change, they're going to have to vote for change."

Acknowledging the succession issue on the minds of MPs on all sides of the house, Mr Brown joked that this was his "latest" pre-budget report. Tony Blair laughed as he sat alongside listening to a speech which signalled little about the "big ideas" the chancellor would implement if, as is widely expected, he succeeds Mr Blair next year.

However, like Mr Blair before him, Mr Brown spelt out his commitment to the "education, education, education" agenda, announcing more money for schools next year as part of the government's ongoing programme of investment.

Announcing higher economic growth than he originally forecast - at 2.75 per cent this year - the chancellor predicted growth at 3 per cent in the next two years.

Declaring that he would meet his own self-imposed "golden rule" on borrowing in this economic cycle and into the next, Mr Brown said an £8 billion deficit this year would be reduced to a £1 billion shortfall in 2007-08 before government finances moved toward a £14 billion surplus by 2011.

Mr Brown told MPs the UK was enjoying "the longest period of sustained growth" in its history, with the economy performing better than its major competitors, apart from the US. But it was necessary to build on past achievements to ensure the next stage of globalisation worked for Britain. Alongside more ambitious education targets, the chancellor also announced that former CBI director general Sir Digby Jones would be the government's new skills envoy.

That announcement was over-shadowed by news of Lord Leitch's report that found that more than one in six young people leave school in Britain unable to read, write or add properly, while the proportion of 16-year-olds staying on in full-time education is below the average for developed countries. In a steely performance against the "iron chancellor", Mr Osborne ridiculed Mr Brown's claims, saying "these are the children who have been educated almost entirely by a Labour government".

Mr Osborne also accused Mr Brown of concealing the fact that the growth rate for capital investment was set to fall, while having saying nothing in his report about increased unemployment or the cash crisis affecting the National Health Service. He added that the chancellor was as responsible as Mr Blair for the "failures" of the Blair years, including hospital cuts, failing schools and a "destroyed" pensions system.

Liberal Democrat Vince Cable said the chancellor's figures were impressive "on the surface". However until they were independently audited, Mr Brown would be like "a clever schoolboy who always gets 10 out of 10 in his tests because he has marked them himself".