LONDON: Chancellor of the exchequer Gordon Brown is expected to admit in his pre-budget statement to the M.P.s that the economic growth is slower than he had expected. It will be below 2 per cent, rather than the three to 3.5 per cent he had estimated in the budget early this year.
Economists are worried that such a scenario will call for increased taxes. Brown has been maintaining that his spending remains within the projections, but with lower tax receipts, the deficit may go up substantially -- from the estimated 6 billion pounds in March budget to even 12 billion pounds at the end of the fiscal. This is going to be the most unpleasant part of the exercise as in all probability, he will be forced to add up at least 10 billion pounds in taxes annually to correct a the structural deficit.
Conservatives have come out with figures that debt is on the rise. They claim public sector debts have grown three times the figure claimed by Brown -- to 1,308 billion pounds against 436 billion pounds.
Brown will have the excuse of increasing oil prices as cause for all the problems. But, he has been hopeful that the slowdown is a temporary phase and even the retailers, who are in doldrums because of the fund squeeze, will be back in business next year.
The chancellor will not be able to announce any tax relief in the pre-budget report as the tax revenue itself is below the expected level.
He is understood to have got two mortgage lenders -- HBOS and Nationwide -- to support a new scheme for first-time house buyers whereby they would have to fund only half the cost of the house, while the other half will be jointly owned by the lender and the Office of the Deputy Prime Minister.
Meanwhile, there is some solace for Brown. There is substantial increase in tax receipts in October, bringing the rise for the first seven months of the fiscal year to 7.6 per cent. The budget forecast for the full year has been 8.5 per cent growth. There is growth seen in income tax and corporation tax , while VAT receipts have not been as expected.
But, according to analysts, the real impact has been in spending -- spending growth has come down -- just 4.1 per cent so far for the year against a budget estimate of 6 per cent. This has been because the public sector employment has been growing at a slower pace, which has helped curb the spending. Even public borrowing is less by 5 billion pounds compared with last year.
There is some talk of Brown levying a windfall tax on oil companies and banks as these sectors have shown record profits this year.
Posted
on : Mon, 05 Dec 2005 13:05 GMT | Politics News
By : Anne Philips
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