Borrowing under-estimated by £10bn, admits Brown

In his pre-budget report to the Commons today, the Chancellor Gordon Brown has highlighted the underlying strength of the economy but admitted that the UK will have to borrow around £10 billion more this year than had been predicted.

Net borrowing this year could top £37 billion, he told MPs, and next year borrowing will come in at £31 billion - £7 billion more than he had predicted.

Mr Brown prepared MPs for the sting that would follow, by beginning his speech with the caveat that this pre-budget report contained "tough choices" over maintaining economic stability during the global downturn, funding the deployments of the British army – for which £6.3 billion has been set aside – and maintaining the impetus on public spending and social inequality.

Growth this year is expected to be 2.1%, in line with the treasury's predictions, and will rise 3-3.5% next year. And since 2000 Britain's economic growth has been "stronger than Japan, the euro area and the USA," he said.

Mr Brown told the Commons that Britain now enjoyed the lowest inflation for 30 years, lowest interest rates since 1955 and that there were now more people in work than there had ever been previously.

Reiterating Labour's commitment to full employment across the UK, Mr Brown cited the current unemployment rate of 5% - half that of France and one point ahead of the USA – as evidence of progress made through schemes such as the 'New Deal'.

On that note, working parents were given a boost after Mr Brown announced the target of achieving 1.5 million child care places by 2006. He also pledged to increase the new child tax credit by 13%, which will see an extra payment of £3.50 a week.

In order to slash spending and bolster revenues, Mr Brown outlined plans to relocate around 20,000 civil service jobs away from the south east and into the regions, and to crack down on evasion of duty on tobacco and alcohol.

However, despite a speech that was strong on investment positives, the Lib Dems claimed that the gap between rich and poor had grown under Gordon Brown's stewardship.

Liberal Democrat Shadow Chancellor Vince Cable said: "If the Chancellor is truly concerned about fairness, how can he justify a tax system where the richest 20% of the population pay 34% of their income in tax compared to 42% for the poorest 20%?

"On today’s budget numbers we are looking at red faces at the Treasury and red ink on the books. No matter how the Chancellor spins his figures, the fact is that he is having to borrow more."

The Lib Dems also accused Mr Brown of "pretending" that his pre-budget statement kept to his earlier commitments on public borrowing.

Democrat Shadow Chief Secretary to the Treasury David Laws said: "Today’s borrowing figures show that the Chancellor has a real problem with the public sector deficit.

"His strategy now is to cross his fingers and hope he can postpone tax increases until after the next election."

The Tory Shadow Chancellor Oliver Letwin dismissed the report as one that confirmed Mr Brown's failure as a chancellor.

"You are taxing and spending and failing," said Mr Letwin. "There's very little sign that all this spending is delivering improvements on the scale that people want to see."

(gmcg)