The Chancellor, whose handling of the economy is praised today in a glowing report by the International Monetary Fund, plans to make the family the centrepiece of his Budget by increasing child benefit. It will already rise from pounds 11.45 to pounds 14.40 a week for the first child next month and the proposed rise for each other child, from pounds 9.30 to pounds 9.60, could now be raised further.
Mr Brown said yesterday: "One theme of my Budget is ... that supporting families by supporting children is not only good in itself but the best investment for any country in its future."
The Chancellor, who may also increase state benefits for the poorest families, will announce his long-promised 10p starting rate of income tax. This will help the low paid and mean a "tax cut for all", but it may not begin to take effect until April of next year.
Mr Brown wants to tax the child benefit payments of higher rate taxpayers but has decided to delay the introduction of the controversial move. He and Tony Blair agreed that to avoid alienating "middle England," sensitive changes will be phased in rather than introduced in one "big bang."
But the Prime Minister is believed to have endorsed Mr Brown's plans to abolish mortgage interest tax relief (Miras), a move that will hit many of the voters Mr Blair has wooed. It has already been cut to 10p in the pound and the Treasury believes that, with interest rates falling, the time is right to scrap the relief.
Mr Brown's preparations for his third Budget were given a big boost by the IMF report. Its annual assessment heaps praise on the Chancellor for "skilful management" of the economy and an "impressive" performance.
The world's economic overseer found more scope for interest rates to fall, downgrading its growth forecast for 1999 slightly to 0.8 per cent. But it said the slowdown would be both gentle and short-lived.
Granting independence to the Bank of England, and the way it has reacted swiftly to weaker growth, sets an example to the rest of the world, according to the IMF.
Poor pensioners can expect help from the Budget but motorists and smokers look certain to be hit by the usual above- inflation increase in the duties on fuel and cigarettes.
The three main themes will be families, helping people off welfare into work and boosting enterprise. Mr Brown's determination to "tackle inequality at source" has been reinforced by a Treasury study that found children's prospects are heavily shaped by the wealth of their families. It will say: "Eighty per cent of boys whose fathers were in the top quarter of income distribution end up in the top half of income distribution. Just over a third of boys with parents in the bottom quarter manage to move to the top half."
The Chancellor will expand the New Deal programme for the unemployed to include the over-50s, who will be offered tax-free credits and a minimum income guarantee to lure them back into the jobs market.
Stephen Byers, the Secretary of State for Trade and Industry, will on Wednesday unveil a series of measures to boost Britain's competitiveness, including a new bureau for small businesses, which are increasingly concerned about red tape.
Rhodri Morgan, the Labour MP who narrowly failed to become the party's leader in the Welsh Assembly, suggested on BBC's On the Record television programme yesterday that Mr Brown's strategy was "redistribution by stealth". "What you do now is to find a method of taxing the better off without them noticing ... it means you don't make a virtue out of increasing people's taxes and telling them that you've increased their taxes."
Francis Maude, the shadow Chancellor, said: "This is a Government which was elected on a promise not to raise taxes at all but which is now cynically and deliberately hitting Britain's workers, pensioners, savers and businesses with taxation by stealth."
Kenneth Clarke, the former Tory Chancellor, accused Mr Brown of leaking his measures to newspapers, saying such action was "deplorable".
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