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Chancellor says UK meets EU criteria for euro adoption

Chancellor Gordon Brown this afternoon delivered an optimistic pre-Budget statement which, while acknowledging the global economic downturn, highlighted an opportunity for growth if world economic recovery was accompanied by increased productivity in the UK.

He said economic growth in the eurozone next year is forecast at 1.5%, while the US economy is expected to grow only 0.7% and Japan is seen contracting -0.7%.

In last year's pre-budget report, the Government predicted economic growth of 2.25-2.75% in the UK. Today Mr Brown said he expected growth to be maintained at 2.25% this year, despite the global economic downturn.

Mr Brown forecast growth at 2.25-2.75% next year, and 2.75-3.25% the following year.

In the light of these figures he said the UK was within the criteria set by the European Union for membership of the single European currency. He revealed the Government was carrying out the work for the "five tests" for the UK's entry to the euro.

Highlights of the pre-Budget statement:

  • further cuts to capital gains tax from next April to 20% on business assets held for more than one year and to 10% for business assets held for two years or longer. There would be an extension of the research and development tax credit for larger companies in order to further productivity gains
  • the 10p band of corporation tax would be extended to help small businesses, and a flat rate VAT regime would also be introduced, saving the average small business £1,000 a year
  • from September the Government will pilot new in-work training schemes
  • an improvement to share option schemes for small businesses.

    Mr Brown forecast a budget surplus for the current year of £10 billion, and of £3 billion next year, then £4 billion, £7 billion, and £8 billion in subsequent years.

    As part of his measures to tackle global warming, Mr Brown announced a consultation document on vehicle charging systems so that non-UK vehicles using UK roads could be charged.

  • The pre-budget report is the Treasury's chance to explain in advance its approach to the full budget the following spring and to update its economic forecasts. (November 27, 2001)
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