Brown responds with fuel duty concessions

Still "prudent for a purpose", the Chancellor of the Exchequer, Mr Gordon Brown, yesterday delivered a pre-budget report designed…

Still "prudent for a purpose", the Chancellor of the Exchequer, Mr Gordon Brown, yesterday delivered a pre-budget report designed to pull the teeth from next week's planned fuel protests, and to set the seal on Labour's expected general election victory.

In a clear attempt to avoid another damaging standoff over fuel duties, the Chancellor announced an across-the-board freeze in petrol and diesel prices at a cost of £560 million sterling, (€932 million) effective for a further year if oil prices remain high until then. In addition, he also unveiled a drive to make ultra-low sulphur petrol the new "green" fuel, cutting its duty by 3p a litre; announced a "British disc" requiring non-British companies and lorries to pay their share for using Britain's roads; and promised a £300 million cut in licence fees, benefiting some 350,000 lorry drivers or their employers, on average at £715 a year.

The shadow chancellor, Mr Michael Portillo, said Mr Brown's statement was "all about quick fixes" and represented a government in "full retreat". And the Liberal Democrats declared "the Iron Chancellor has buckled" while the Scottish National Party proclaimed his package "a victory for the politics of protest." But leaders of the fuel protest which brought Britain to near-standstill in September dismissed the concessions as "very, very poor." And Mr Roy Masterston, a haulier who led the blockades at Trafford Park in Greater Manchester, predicted next week's planned convergence on London would proceed.

Armed with a raised surplus for this year - up to £16.6 billion from £14 billion - Mr Brown combined the promised relief for hauliers and farmers with more money for schools, targeted tax cuts, reforms to encourage entrepreneurs, small businesses and savers, and stamp duty exemption for the purchase of residential properties in the disadvantaged inner cities.

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And Mr Brown had Labour MPs cheering to the rafters as he capped big increases for pensioners - an extra £5 a week for a single pensioner, and £8 for a married couple, in a £2.7 billion package - with the announcement that the winter allowance would deliver an extra £200 to every pensioner household in the country in the next few weeks.

However, the Chancellor coupled his pre-election largesse with an assurance to the City that he would not risk a return to "the old familiar stop-go cycle" - by declaring his first priority "to lock in stability" by "prudently cutting debt and debt interest payments to keep inflation and interest rates low."

"The risk for Britain is a repeat of the late 1980s mistake - claiming a surplus one year could fund tax cuts for every year and - by committing in tax what was yet to be earned, stoking up an unsustainable consumer boom, forcing interest rates and mortgages to rise," he told a packed Commons chamber. Labour's "first fiscal rule," Mr Brown declared, was that there must be a surplus over the economic cycle. The second - the sustainable investment rule, bulwark against short-term thinking - was "that while over the cycle we will borrow for investment, we will not borrow for consumption and we keep debt at a prudent and sustainable level below 40 per cent of national income."

Mr Brown told MPs the Treasury forecast for the next year was that:

inflation will meet its target of 2.5 per cent

manufacturing will grow by 2-2.25 per cent

exports will grow by 7-7.5 per cent

growth will range from 2.25-2.75 per cent

consumer demand will grow by 2.25-2.5 per cent

business investment by 1.5 to 2 per cent, and

total investment by 4.25-4.5 per cent.

The Chancellor claimed that by 1997 the ratio of debt to national income had risen to 44 per cent, and that Labour had reduced this to 36.8 per cent by April last. Because they were cutting the stock of debt by as much as one-third, Mr Brown told the House "the public sector net debt as a share of GDP will now fall from 36.8 last year to 32.3 per cent this year, to 30.9 per cent in 2001-2" with the debt to GDP ratio finally forecast to fall to 30 per cent "and remain there in future years".