34/ Chancellor Predicts UK Economy to Grow. - The Chancellor at an awards ceremony tonight at the London Science Museum.

Its to recognise successful business in the inner cities. Gordon Browns ideal event, mixing support for enterprise and for hard-up communities. A chance for him to smile. A smile that reflects his upbeat view of the economy. Amid all the doom and gloom in the news, he thinks any downturn will be short and shallow. Last March, for example, he thought the economy would grow two and a quarter per cent next year. Now hes shaved that by just a quarter point. The year after well more than make up for the lost ground. Over his previous forecast, we gain a half point of extra growth then. - The Chancellor thinks that interest-rate cuts will work their magic, and keep consumers in the shops and the economy busy. Last time the Treasury was optimistic in 1998, it was right

to be. Mr Browns taking a gamble on being right again. - Hes produced a forecast which suggests that the economys just going to go on much as it is at the moment. No recession. Thats better than other economist, and even better than what I think is going to happen, which is I think were going to get at least close to recession. - Next, what about Government borrowing? Well, after three years of paying off debt, this year the Government starts borrowing again. And next year he borrows 12 billion $ - thats 10 billion more than hed planned. Its because tax revenues are coming in more slowly. Poorer tax revenues despite a strong economy. One reason for that is in the small print. The Chancellor thinks a collapse in annual bonuses paid to City workers is making a difference to his tax receipts. None of his numbers yet allow for much extra public spending towards the end of the

Parliament though. The more we want spent on all public services then, the more tax well have to pay. Await a full review of spending next year. - Finally, what about the longer term? The Chancellor wants to get Britains relatively low productivity up. Today he confirmed some modest plans to promote growth, a new tax credit for research and development, details to follow, and a cut in capital gains tax. - Business will be very pleased to see the tax credits on both research and development spending, and on training. We had asked for those in our pre-Budget report and were glad to see the Chancellor is preparing consultations for those both to be enacted in the Budget in March. - So, in the face of adversity, Mr Brown even managed to pull off a modest give-away package today. He was helped by the cushion hed given himself in previous budgets, and

by his unwavering belief in the strength of the British economy.