Economics - Brown's UK is on a tight Budget.

(From Financial Director)

Byline: Dennis Turner.

The second week of April saw the unusual coincidence of fiscal and monetary policy statements coming together within a 24-hour period. First there was the Budget, Gordon Brown's seventh and most challenging, which was followed the next day by the outcome of the Monetary Policy Committee's (MPC's) latest deliberations. The fact that base rates were left on hold at 3.75% reflects uncertainty. Although some recent business surveys pointed to continuing weakness in activity, they were not enough to persuade the MPC to cut rates again.

As far as the outlook for the economy over the next few years is concerned, there was much more interest in the Chancellor's statement. As well as the usual forecasts for growth and the government's fiscal position, there were one or two very revealing ideas of long-term thinking buried in the small print.

Given the well-documented problems in the world economy, which have been compounded by events in the Middle East, this was always going to be a difficult Budget for Brown. For once, he was probably pleased to have been bumped off the front pages by events elsewhere. Overall, he played it safe. His ambitious public sector spending plans may have pointed to tax rises, but the fragility of demand prevented him adding to last year's NIC increases, which are just taking effect. On the other hand, any hopes he might have had of boosting activity by cutting taxes were constrained by the growing deficit in public sector finances.

Not surprisingly, the Budget speech highlighted the positive aspects of the UK economy and the contribution the government has made to these strengths. In terms of inflation, base rates, growth and jobs, the Chancellor had a good story to tell, relative both to Britain's past record and also to the current performance of other major economies. There may be some slack in our economy but, looked at from Berlin, Paris, Tokyo and perhaps even Washington, the UK seems in reasonable shape.

Brown presented a package that showed how his spending plans could be met without taking any risks with his two fiscal guidelines - the Golden Rule and the Sustainable Investment Rule. Borrowing rather than taxes will fill the hole in his revenues, and he admitted wanting more than he ...