Chancellor is upbeat on economy

The Chancellor yesterday told MPs in a debate on the Treasury's summer economic forecast that there was "no need for a reaction to the recent slowdown in activity". Giving an up-beat account of the economy, Kenneth Clarke said inflation was expected to rise temporarily to 3 per cent before falling back to 2.5 per cent by the end of 1996.

The Chancellor said the abolition of capital and inheritance taxes was a long-term ambition and hinted there could be action towards that objective in the Budget. "When the economic conditions are right, we will return to our tax-cutting agenda," Mr Clarke said.

Retail prices for June will be published today,although Mr Clarke would have known the figures yesterday.