Outlook: Things couldn't be better for Brown

IT IS an unlikely position for a Labour Chancellor. Gordon Brown delivers his Budget speech next Tuesday with the public finances in better shape than for more than 10 years. The likely out-turn for this fiscal year is a budget surplus of around pounds 8bn. Not since the 1960s has a Labour Chancellor been able to balance the books in this way.

Furthermore, the immediate outlook is for better still. From 1 April, the Inland Revenue begins the process of switching to quarterly payments of corporation tax. The effect of this will be to give the Chancellor a one-off cash-flow benefit of pounds 1.5bn in the first year, rising to pounds 5bn over five years. Also already announced for next financial year, there's an extra pounds 1.5bn from the phased abolition of tax credits on dividends, pounds 1bn from the abolition of profit-related pay, and pounds 1.5bn in extra excise duties.

There is, of course, another side to the balance sheet - government spending. One of the reasons for the present buoyancy in the figures is that, inexplicably, government spending is coming in lower than forecast. That cannot last, and in any case, announced extra spending on health and education begins to kick in with a vengeance from next fiscal year onwards. All the same, it is looking more and more possible that the Chancellor will be able to maintain a budget surplus right through the very worse that the present downturn in the business cycle has to throw at him.

By any stretch, this is a truly remarkable state of affairs. The general assumption in the City is that the overall fiscal stance of the Budget will be neutral, though the Monetary Policy Committee's decision to leave interest rates unchanged, taken this week with prior knowledge of the broad fiscal outline of the budget, might suggest otherwise. Even so, it is plain that whatever giveaway might be forthcoming, it is not going to be a significant one. The fiscal cannon is recharged, but for the time being, the Chancellor is not tempted to fire it.

The cynical view, as well as the almost certainly correct one, is that the Chancellor is simply waiting for the run-up to the next election, when voters will be pump-primed in the traditional manner. But actually there is no urgent need, as things stand, to provide the economy with a fresh fiscal stimulus. Perhaps surprisingly, though not to readers of this column, Britain looks as if will avoid a fully fledged recession - as defined by two consecutive quarters of negative growth.

The good news from the US yesterday was that the American economic miracle continues unabated. Despite the booming economy and tight labour market, wage pressure remains in abeyance. There's no sign of inflation and therefore no immediate need for the Federal Reserve to raise interest rates. No wonder President Clinton survived the Monica Lewinsky affair. For an explanation of why he remains one of the most popular presidents in US history, look no further than the Dow at 9,665.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Tax Manager / Accountant

£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

Recruitment Genius: Financial Administrator

£19000 - £22000 per annum: Recruitment Genius: An exciting opportunity has ope...

Recruitment Genius: Mortgage Administration Team Leader

Negotiable: Recruitment Genius: This company prides itself on its ability to p...

Recruitment Genius: Mortgage Advisor

Negotiable: Recruitment Genius: This company prides itself on its ability to p...

Day In a Page

A Very British Coup, part two: New novel in pipeline as Jeremy Corbyn's rise inspires sequel

A Very British Coup, part two

New novel in pipeline as Jeremy Corbyn's rise inspires sequel
Philae lander data show comets could have brought 'building blocks of life' to Earth

Philae lander data show comets could have brought 'building blocks of life' to Earth

Icy dust layer holds organic compounds similar to those found in living organisms
What turns someone into a conspiracy theorist? Study to look at why some are more 'receptive' to such theories

What turns someone into a conspiracy theorist?

Study to look at why some are more 'receptive' to such theories
Chinese web dissenters using coded language to dodge censorship filters and vent frustration at government

Are you a 50-center?

Decoding the Chinese web dissenters
The Beatles film Help, released 50 years ago, signalled the birth of the 'metrosexual' man

Help signalled birth of 'metrosexual' man

The Beatles' moptop haircuts and dandified fashion introduced a new style for the modern Englishman, says Martin King
Hollywood's new diet: Has LA stolen New York's crown as the ultimate foodie trend-setter?

Hollywood's new diet trends

Has LA stolen New York's crown as the ultimate foodie trend-setter?
6 best recipe files

6 best recipe files

Get organised like a Bake Off champion and put all your show-stopping recipes in one place
Ashes 2015: Steven Finn goes from being unselectable to simply unplayable

Finn goes from being unselectable to simply unplayable

Middlesex bowler claims Ashes hat-trick of Clarke, Voges and Marsh
Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... again

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Atwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Let's Race simulator: Ultra-realistic technology recreates thrill of the Formula One circuit

Simulator recreates thrill of F1 circuit

Rory Buckeridge gets behind the wheel and explains how it works