Budget guessing game beats the first cuckoo

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The unseasonally chilly weather means the annual Budget guessing game has got under way before the first cuckoo has signalled spring. The first guess is that Mr Clarke will chop a penny off the basic rate of tax. This is a very reasonable working assumption: the pounds 2bn cost could easily be met by the normal reduction in next year's contingency reserve.

The "penny off" option is only painless, however, if Mr Clarke either holds to the existing public expenditure and borrowing targets or is not embarrassed by overshooting them. It is tricky for a government that makes a virtue of reducing the size of the public sector to be insouciant about borrowing more than its target for several years on the trot. Unfortunately, it will be even harder to hold to the existing targets.

Mr Clarke shrugged off last year's overshoot, simply postponing the projected reduction in government borrowing by a year. The date the borrowing requirement was meant to hit zero was put back from 1998/99 to 1999/2000.

The financial markets assume that the "make the Budget balance but not yet" principle will be applied again, judging that he is not a Chancellor who will enforce lower expenditure plans in the 12 months before the election when he did not do so two years before. This is one reason for the recent upward creep in gilt yields.

What's more, the coming months are likely to bring evidence of an upturn in consumer spending that will cheer Tory backbenchers no end and increase the pressure to do the same thing again. Last Budget's tax cuts, which last month delivered the biggest drop in the cost of living in 10 years, will work their magic.

The current display of memorabilia in the Treasury's imposing lobby must be acting as a daily reminder of his political priorities to Mr Clarke. In a 50-year-old poster headed "Wise Budgeting Helps Saving", a group of citizens ask: "Why must taxes be so high? Why is money so tight these days? When are things going to get better?"

The answer: next April, at a guess.