Brown budget will aim to please voters

British Chancellor of the Exchequer Gordon Brown will today unveil a budget that provides targeted support for a range of groups…

British Chancellor of the Exchequer Gordon Brown will today unveil a budget that provides targeted support for a range of groups - including savers, working families, pensioners and first-time house buyers - while seeking to enhance his reputation for prudent management of Britain's public finances.

Mr Brown has been under fire in recent years from groups like the International Monetary Fund which say his forecasts for tax revenues are too optimistic and that spending needs to brought under control.

Stepping up Labour's bid to win a third general election just 50 days from now, the chancellor will say that he is still on course to meet his fiscal rules and that the government's spending plans between now and 2008 remain fully affordable.

But, unveiling a budget which is expected to be broadly fiscally neutral, he will employ a range of revenue-raising measures - such as a new drive to close tax loopholes - to fund tax breaks aimed at boosting Labour's standing with the electorate.

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"We expect a modest giveaway of around £1 billion to £2 billion," said Mr Philip Shaw, chief economist at Investec. "Further ahead though, we feel ahead that tax increases are likely to meet the fiscal rules in the next economic cycle."

Among the "sweeteners" that Mr Brown is likely to announce today is an unexpected extension in the deadline for higher limits investment in Individual Savings Accounts from 2009 to 2010.

Extending the time in which people can invest the full £3,000 in a cash ISA or £7,000 in a cash-and-shares ISA would cost the treasury hundreds of millions of pounds.

Mr Brown is also expected to unveil an increase in the Working Tax Credit to help families on lower incomes. The £60,000 stamp duty threshold will rise more than £100,000 to help first-time buyers. But any increase in the Inheritance Tax threshold above the current level of £263,000 is likely to be no more than inflation-linked.

On the spending side, the chancellor's principal focus will be on lifelong learning, setting out more detail of expenditure on both early years childcare support and adult skills.

Mr Brown is also likely to update MPs on the costs of the Iraq war, unveiling a new increase in the special reserve for UK military operations on the ground.

With parliament set to be dissolved in little more than four weeks from now, the chancellor's main focus is certain to be on stepping up the political fight against the Conservatives.

Mr Brown is likely to argue today that tax credits are a far more successful way of supporting families on lower and middle incomes than adjustments in income tax thresholds that might be contemplated by the Tories.

Mr Brown is increasingly convinced that the Conservatives are set to use much of their planned £4 billion of tax cuts to raise the threshold for the 10p tax rate.