Clarke upbeat on economy

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The Independent Online

Political Correspondent

Kenneth Clarke, the Chancellor, yesterday left the door open for tax cuts in next month's Budget with an upbeat appraisal of the economy in which low inflation had trimmed the costs of delivering public services.

In a determined bid to dampen down speculation that he might cut taxes by the equivalent of 2p off basic rate income tax, the Chancellor repeated that there would be no tax cuts if the country could not afford it, "if it is not in the public interest".

He also admitted on BBC1's Breakfast with Frost that borrowing had been higher than he would have liked, while VAT revenues had fallen through low inflation. But he said that compared with his first two Budgets, "the third one ... I'm looking forward to, because we are on our way to being a very successful enterprise economy".

Mr Clarke will want to deliver something on Budget day. A National Opinion Poll survey for the Sunday Times showed Labour with a 30-point lead and Tony Blair capturing the centre ground. Warning of tighter controls on public spending, Mr Clarke stressed that successful economies were low-spend, low-tax ones. "You have to control public spending without doing actual damage to key public services ... without damaging the welfare state in its essentials."

Stephen Dorrell, the Secretary of State for Health, meanwhile played down the prospect of his department picking up a larger share of the costs of caring for elderly people. "I think that individuals ... should accept responsibility for caring for themselves at the end of their lives. I also think the state should support those who are unable to pay that bill for themselves ... there should be proper arrangements to encourage individuals to plan to meet that cost."

Gordon Brown, the shadow Chancellor, said any tax cuts would be a political sweetener. "For the first time Ken Clarke has been forced to admit that borrowing will be higher than predicted and tax revenues have dropped because of a faltering economy," he said.