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Boost for Brown as borrowing hits £35bn

Philip Thornton,Economics Correspondent
Friday 23 April 2004 00:00 BST
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Gordon Brown, the Chancellor, insisted yesterday that he would hit the "golden rule" that governs the public finances as official figures showed that borrowing turned out significantly better last year than he predicted in last month's Budget.

Public borrowing was £34.8bn in the year to March 2004, the Office for National Statistics said. This was up from £22.7bn in 2002-03, but almost £3bn less than the Chancellor's Budget forecast of £37.5bn.

He is expected to use the figures to hammer home his message to his fellow finance ministers at the meetings of the Group of Seven nations in Washington this weekend that Europe must reform the way it regulates its public finances to bring it in line with the UK.

The undershoot gives Mr Brown a better chance of meeting his self-imposed "golden rule" - that over the economic cycle, the government should borrow only to invest - and may dampen speculation of imminent tax rises to ensure he balances the book.

The Treasury is urging the member states of the eurozone to reform the terms of its stability and growth pact to allow countries to borrow during a downturn rather than to cut spending in order to hit a deficit target in each year - currently 3 per cent of economic output.

A Treasury spokesman said there were "welcome developments" on the tax front, with income tax revenues of £9.3bn in March, up from £8.2bn 12 months earlier.

It follows an upbeat assessment by the IMF, which forecast the UK would grow by 3.5 per cent this year - at the top end of Treasury forecasts. Figures on economic growth published today should show analysts forecasting another quarter of 0.9 per cent growth in the first three months of the year.

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