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Brown cuts UK growth rate again
LONDON, England (CNN) -- Britain's Chancellor of the Exchequer Gordon Brown on Wednesday cut the country's economic growth forecast for the second time in four months. The climb down came as he unveiled his seventh annual budget to parliament. Economists had been saying for some time that Brown had been too optimistic in previous predictions as the global economy struggles to eke out growth. The economy is now expected to grow between 2.0 percent and 2.5 percent this year and not the 2.5 percent to 3.0 percent Brown had pencilled in his pre-budget report in November. He blamed an economic slowdown in other major economies, like Germany, Japan and the U.S., for Britain's economic woes. "I now expect growth this year will be 2.0 to 2.5 percent, double the euro area and Japan and about the same level as in America,'' Brown told parliament. "Looking forward, the largest repercussions for the British economy arise from the further fall in growth prospects for the euro area.'' Brown, who has preached "prudence" since the Labour Party of Prime Minister Tony Blair came to power in 1997, has also been forced to raise more money from the financial markets to plug a hole in the country's finances. Britain's deficit would rise to £27 billion for 2003/04, Brown said. In November he predicted a deficit of £24 billion for the same period. Brown opted for an April budget instead of the normal March announcement in the hope that the war in Iraq would have come to an end. He has already set aside £3 billion for Britain's contribution to the conflict. Most analysts think more tax rises will be needed in the coming years if Brown is to keep to his self-imposed fiscal rule of borrowing only to cover investment spending over the economic cycle. But Blair's government has pledged to spend £98 billion over the next three years on public services, like transport and health service. His government has also promised it would not raise taxes on salaries. The opposition Conservative Party and businesses have complained Brown has already broken that promise when he raised £8 billion through increased national insurance contributions, which took effect this week. Other points in Brown's budget: • Extra £330 million for counter-terrorism measures. • £240 million towards the United Nations' appeal for Iraqi humanitarian aid. • Inflation to hit 2.75 percent in the fourth quarter of this year. • Economy grown every quarter for the last six years. • Reaffirmed Bank of England's inflation target of 2.5 percent. • Continuing risk from stock market volatility. • Domestic demand to rise by 3.0-3.5 percent in 2004 and 2005. • Companies earning under £56,000 p.a. exempt form Value Added Tax • Introducing more tax incentives for research and development • 1 pence on a pint of beer • 4 pence on bottle of wine • 8 pence on packet of 20 cigarettes • Price of spirits frozen • Freezes corporation, capital gains tax • Defers 1.28 pence increase in fuel tax for six-months
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