Upbeat Clarke leaves door open for tax cuts

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, writes Patricia Wynn Davies.

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".

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.