Mr Gordon Brown, Chancellor of the Exchequer, was yesterday forced for the second time in succession to admit that his growth forecast for this year was over-optimistic but surprised analysts by keeping his forecast for next year unchanged.
In his seventh budget, equalling a record set by Mr David Lloyd George, Mr Brown also increased estimates for government borrowing by £3 billion for this year to £27 billion but said Britain's economy remained strong compared with the rest of Europe.
The chancellor announced £330 million of new funding for domestic counter-terrorism measures as well as a package of tax incentives for small businesses and an investigation into housing supply and long-term, fixed-rate mortgages.
Other headline measures included a new "child trust fund" and an additional £100 winter allowance for the over-80s.
Business leaders gave a mixed reaction to what had been billed by the Treasury as a "Budget for productivity".
Mr Digby Jones, director-general of the Confederation of British Industry, said the chancellor had "at last started to restore his business-friendly credentials".
But others described the budget as at best "neutral" and at worst a failure to understand the plight of British manufacturers.
Mr David Frost, director general of the British Chambers of Commerce, said: "The rise in national insurance contributions this week took away much more than the chancellor has given, particularly when combined with the £21 billion of extra regulations piled on business since 1997."
Tory leader Mr Iain Duncan Smith took the government to task over its economic record but failed to spell out an alternative to the higher taxes and borrowing Labour is using to improve public services.
Accusing Mr Brown of mishandling the public finances, he said the nation would pay the price in further taxes for the chancellor's mistakes
City commentators said Mr Brown appeared to be positioning Britain for a global upturn, but that, if he was wrong, there could be a ballooning budget deficit in the coming years.
"The confidence that he is going to be right is reflected in the lower-than-expected borrowing figures and no dramatic revenue-raising measures. So he is backing his judgement," said Mr Loughlin Hickey, head of tax at KPMG. - (Financial Times Service)
