Brown gets £3bn windfall from road spending 'fiddle'

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The Independent Online

Gordon Brown was handed a £3bn windfall yesterday from an arcane change to government accounts that could enable him to cut taxes in the forthcoming Budget without breaking his cherished fiscal rules.

The Office for National Statistics admitted it had incorrectly calculated a chunk of spending on road maintenance in the national accounts.

The ONS said that since 1998 there had been "double counting" of about £400m a year in spending by the Highways Agency, which looks after trunk roads and motorways.

The effect is to move that money into the capital account from current spending. The change is good news for the Chancellor because his "golden rule" - that the Budget must at least be in balance over the economic cycle - refers only to current spending.

With the current cycle starting in 1999 and not due to end until spring next year, this would improve the Budget situation by a total of £2.9bn, Investec bank said.

The revision will also benefit the Government's figures in the next cycle, when the vast majority of independent analysts predict Labour will have to raise taxes to balance the books.

The ONS revealed it was planning to make the changes 10 days ago but refused to give any details, sparking speculation it could cover the entire £2bn annual spending budget for roads. But yesterday it said it covered only the Highways Agency, which adopted a novel accounting system that does not include any element of depreciation.

The Tories accused the Treasury of "brazen cheating" when the news broke. Oliver Letwin, the shadow Chancellor, said: "At best the timing of these changes is very convenient for the Government. There will inevitably be suspicions that the figures are being fiddled."

A spokesman for the Treasury dismissed the claims, saying there would be no relaxation of its fiscal discipline.

Robin Lynch, the ONS's director of national accounts, denied there was any pressure from the Treasury to publish the figures now, despite admitting there had been a "technical" meeting between the two departments in December 2004, that agreed the changes. "In hindsight I wish we had done a year ago what we are doing now," he said.

City economists said the changes were smaller than had been expected but would still benefit the Government. Philip Shaw, the chief UK economist at Investec, said: "Does this help in meeting the golden rule? The short answer is yes."

Stewart Robertson, a director of Lombard Street Research, said: "The reclassification may be entirely justified but the timing of the announcement, and its content, are very convenient for the Government."