Brown looks to post-war consumer boom

Chancellor Gordon Brown today predicted a rapid economic bounce back with consumer spending set to pick up as war in Iraq draws to a close.

Delivering his seventh Budget statement, he said the UK economy would be well placed to capitalise on an expected global upturn.

He shaved just half a point off his growth forecast for this year – now predicted to be 2 to 2.5 per cent – a more optimistic prediction than many City analysts had been forecasting.

He told MPs Britain was expected to outperform all the other major industrialised economies in the year ahead.

The Chancellor said that borrowing this year would rise to £27 billion – just £3

billion more than he was predicting at time of the Pre–Budget Report in November

and less than many analysts had forecast.

After that it would fall back to £24 billion next year dropping to £22 billion by 2007, ensuring that he would "comfortably" meet his own tax and spending rules.

Mr Brown maintained growth forecasts for 2004 and 2005 at between 3 per cent to 3.5 per cent as the rate of economic growth returns to trend after two difficult years.

He added that the performance this year was still likely to outstrip rivals: "Along with the US, we are expected to be the fastest growing G7 economy in 2003."

The Chancellor pointed to weaker growth prospects in the Eurozone area as a major reason behind the weaker–than–expected UK GDP rate in 2003.

Mr Brown confirmed he would present the Treasury's assessment on euro membership by the first week in June.

Mr Brown said he could prudently set aside new resources "in the reserve margin for annually managed expenditure" – showing that Britain could combine economic stability and rising employment with rising investment in hospitals and schools.

The Chancellor pledged to take every step to preserve and protect the security of the United Kingdom.

Mr Brown told MPs he was setting aside an extra £330 million for additional domestic counter–terrorism measures.

The Government, he said, will contribute £240 million to the humanitarian work in Iraq to help with the reconstruction effort.

The Chancellor told MPs: "Britain – even in difficult world conditions – is able to meet our military and security costs abroad and at home and the costs of building peace, while maintaining in full our record investment in schools, hospitals, transport and policing."

Britain has experienced the longest period of sustained economic growth and growth in living standards for half a century, Mr Brown said.

The economy has grown uninterrupted in every quarter over the last six years, he added.