Chancellor of the Exchequer Gordon Brown has delivered a Budget of pre-election sweeteners in the run-up to Labour's bid for a third term in power.

Bitter pills may yet be served in HM Treasury small-print, but – as expected – Brown’s Financial Statement delivered vote-winning measures such as child benefit rises, early learning help, renewed focus on secondary and vocational education and a number of new allowances and rebates for pensioners.

For Britain’s 32 million motorists the Budget news was good news: a temporary freeze on company car tax, petrol duty and on vehicle excise duty for small to medium vehicles. But describing his Budget as one of ‘affordable cuts and essential improvements’ Brown also announced a £65m spend on new centres for vocational qualifications and on employee training, along with a £2,000 return-to-work bonus as well as a target of 300,000 in apprenticeship schemes by 2008.

Low inflation and low interest rates were key to continued British stability and growth, and he saw the country’s business future as a world leading location for ‘science based, knowledge based, skills based industries’.

Adding that there was to be no raise in corporation and capital gains taxes, the insurance premium tax (IPT), nor the climate change levy, Brown told Parliament he was not cutting small business support either and has earmarked £300m in local business-led regeneration.

The Conservatives immediately attacked the Budget speech as ‘The Bribes of March’. Leader Michael Howard said the Government had run out of solutions with its ‘vote now and pay later’ approach, and that ‘this is the last Budget this Chancellor will ever deliver’.

Fuel duty

Road fuel duties will rise in line with inflation by 1.22p per litre, deferred to September 1 in recognition, the Chancellor said, of volatile oil markets.

Brown also said the planned duty differentials for biofuels and road fuel gases will continue until 2007/08.

Vehicle excise duty

VED rates will be frozen for the four least polluting carbon dioxide bands and increased by a standard £5 for the two most polluting bands, as well as for cars and LCVs of more than 1,549cc registered before March 1, 2001. The changes will take effect from April 1.

The VED bands will be renamed A-F, from the current lettering of AAA-D, while retaining their existing carbon dioxide emission level. This will be done in order for the VED lettering to match that of the new energy efficiency labelling being introduced this year.

Industry comment

The RAC Foundation welcomed as 'prudence at the pumps' the Chancellor's decision to put increases in fuel duty on hold for six months and to freeze VED for smaller cars. 'The Chancellor has been shrewd as well as prudent,' said RAC Foundation executive director Edmund King. 'He is obviously aware of the voting power of 32 million motorists.'

Ray Holloway, petrol retailers' director for the Retail Motor Industry Federation (RMI), said: ‘Fuel prices are likely to remain volatile during the Spring, so the Chancellor’s decision to freeze fuel duty levels until September is a wise one, especially with a general election on the horizon. The Chancellor has donned velvet gloves for this Budget, but regardless of who wins in May, there will be a post-General Election budget, and then all bets will be off.'