Gordon Brown can afford to give a confident Budget. But it's what happens next that matters

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It was hardly surprising that the Chancellor of the Exchequer, Gordon Brown, should use his speech to Labour's Scottish Party Conference yesterday to spin next week's Budget. Predictably enough, Mr Brown informed his audience that "the Budget will lock in our commitment to monetary vigilance and fiscal discipline". There will, Mr Brown seemed to be saying, no pre-election giveaways and, what's more, there will be no nasty tax increases after the election. No, no need for any of that; as Mr Brown put it: "We will meet all our fiscal rules in a prudent and long-term way, and we will take no risks with stability now, in the next parliament or at any time."

It was hardly surprising that the Chancellor of the Exchequer, Gordon Brown, should use his speech to Labour's Scottish Party Conference yesterday to spin next week's Budget. Predictably enough, Mr Brown informed his audience that "the Budget will lock in our commitment to monetary vigilance and fiscal discipline". There will, Mr Brown seemed to be saying, no pre-election giveaways and, what's more, there will be no nasty tax increases after the election. No, no need for any of that; as Mr Brown put it: "We will meet all our fiscal rules in a prudent and long-term way, and we will take no risks with stability now, in the next parliament or at any time."

All familiar Brownian rhetoric, all delivered with that peculiar forcefulness that has become his trademark. And, to be fair to the Chancellor, he has consistently defied his critics and faced down his detractors when it comes to economic forecasts. Time and again, political opponents and independent economists have warned of a "recession made in Downing Street" or of some other catastrophe just around the corner; yet, in Budget after Budget Mr Brown has been able to announce that, once again, he has managed to meet the targets he set himself and that the Treasury was right and the rest of the world wrong.

The economy has been resilient and growth robust; Mr Brown's fiscal rules have been met, if only just. In his speech to the Scottish conference on Friday, the Prime Minister was happy to call him "the best chancellor this country has had for 100 years". That's up on January, when Mr Blair called him "the most successful British post-war chancellor". Soon, maybe, it will the best chancellor since the office was founded under Henry III in the 13th century. Are Mr Blair and Mr Brown getting on better these days?

Still, as investors know, past performance is no necessary guide to the future. In the short term, there isn't much reason to doubt Mr Brown's word. But Mr Brown is a politician to his fingertips, and it would be strange if he wasn't clever enough to find one or two sweeteners for swing voters. He would be well advised to engineer some "symbolic" moves, perhaps taking some middle-class voters out of the higher-rate bracket, maybe reducing stamp duty for modest homes, so helping first time buyers, and, possibly, helping pensioners having difficulties paying the council tax. All headline-grabbing stuff, and small enough sums to make no real difference to the overall budget deficit. Such policies would certainly wrongfoot the Tories, who have been making some headway in this territory. However, Mr Brown's next Budget probably won't be a huge bonanza for anyone.

What voters should really be focusing on is what happens after the election, and in particular two questions. Will interest rates rise? Will Mr Brown, or whoever is the chancellor, have to raise taxes?

On the first point, the signs are that opinion in the Monetary Policy Committee of the Bank of England is, indeed, edging towards raising rates, and may move possibly as early as this Thursday, although they may well be reluctant to do anything that might be construed as interfering in politics until after the election. A quarter point rise on the Monday after polling day could thus be on the cards, too late to make any difference at the polls, but still bad news for growth and the chances of Mr Brown keeping public finances on track.

That may be more difficult than Mr Brown makes it look. A budget deficit of 3 per cent of GDP at this stage in the cycle - when the economy is growing at a respectable rate - is higher than it should be. Mr Brown has made it clear that "investment" in the public services, ie spending on schools and hospitals, comes first. So with little room left to raise stealth taxes and the old pledges on income tax renewed once again, it seems likely that Mr Brown will have to turn once more to national insurance to make his sums add up. He will be asked about this many times in the next few weeks. Listen to what Mr Brown says, and how he says it, very carefully indeed.

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