Gordon Brown to pledge prosperity in third term pitch

Gordon Brown will pledge prosperity for Britain and help for the poor this week in a major pre-election speech, even as critics say taxes will have to rise next year.

As Prime Minister Tony Blair, under fire for his Iraq war policy, seeks to woo the electorate back with promises of tough crime and security measures, his powerful finance minister will seek to underline the message with glad economic tidings.

Mr Brown's pre-budget report (PBR) today will also focus on boosting enterprise and science so Britain can compete better against countries like India and China, shifting attention from disappointing tax receipts and higher than expected spending.

"We must build a stronger shared national economic purpose as Great Britain, a stronger sense of our patriotic vision of Britain's future as a country of aspiration and ambition," Mr Brown said in a magazine article this week.

Economists said this desire to focus on the long-term was unsurprising given the election was probably only six months away and Mr Brown had precious little margin before he broke his own strict rule - that he only borrows to invest over the economic cycle.

"The golden rule of politics is: don't raise taxes or cut spending ahead of an election," said Ross Walker, UK economist at RBS Financial Markets.

"As such, the Chancellor is highly unlikely to take any action in the 2004 PBR to shore up the public finances despite the fact that if current trends continue, his fiscal golden rule will be broken in 2005."

Mr Brown doesn't seem to think there is a problem. "We are meeting our fiscal rules," he told a news conference.

The Treasury is hoping for a late windfall from North Sea tax of several billion pounds thanks to record oil prices.

Mr Brown will most likely trumpet that the last three months of this year will mark the 50th successive quarter of economic growth in Britain - the longest such uninterrupted period since records began.

He is also sure to note that interest rates are much lower than when Labour came to power in 1997 while joblessness has fallen to a record low even as inflation remains very low.

"It is generally accepted that Britain's hard-won and newly won stability is not an accident but the result of our new fiscal and monetary framework, backed up by policies for competition, flexibility and enterprise," he said this week.

Despite accusations of "gloating" by allies of the Prime Minister like newly-appointed EU Trade Commissioner Peter Mandelson, Brown believes convincing voters that the economy is in good hands is the key to a successful election.

His determination to embrace a vision of Britain several years ahead will also re-ignite speculation that he is launching a personal manifesto to become leader of the Labour party.

The worry for Mr Brown, however, is whether the good news on the economy will last. Recent figures have suggested that his forecast growth of three to 3.5 per cent next year won't be attainable.

Most dangerously for the government, the housing market appears to be cooling rapidly, raising fears that a crash could be around the corner and also depriving Britons of the feelgood factor that has given spending such a boost in recent years.