Brown targets children and elderly for aid

Gordon Brown will announce special measures to help children and pensioners in his Budget today, when he will pledge to create a "stronger, fairer Britain".

The Chancellor will unveil new policies to help families with children and elderly people who are struggling financially, amid concern that the Government may fail to hit its target for eliminating child poverty and anger among pensioners that the basic state pension will rise by just 73p next month.

Mr Brown's room for manoeuvre in his fourth Budget was increased yesterday when figures showed his "war chest" is much larger than previously thought and that the public finances are in their best shape since the Lawson boom of 1989. Economists now expect a £9bn surplus in the current financial year - double the £4.5bn surplus forecast in last year's Budget.

The Chancellor will disclose today how he plans to combine the various methods of helping 4.5 million families with children into a single tax credit for the mother, which could be worth more than £40 a week for the poorest children. The new integrated child credit will be means-tested and scaled back for people paying the 40p top rate of income, although child benefit will remain universal.

Mr Brown will announce extra cash help for working mothers who want to stay at home after having a child and will also set up a new Children's Fund to provide grants for voluntary and community projects to alleviate child poverty.

Although the Chancellor will reject pressure for an aboveinflation increase in the state pension for all elderly people, he will channel more money to the poorest pensioners. He may announce a new tax credit to ensure that old people just above the poverty line keep more of their income.

Mr Brown will also announce measures to help jobless people aged over 50 re-enter employment. Trial schemes, under which those out of work for more than a year receive an earnings top-up of up to £60 a week, will be extended nationwide. This measure will provide most help in Labour's traditional strongholds and, combined with the boost for the old and the young, will be welcomed by Labour MPs worried by voter disillusionment with the Government. "We need a Budget for the heartlands," one minister said last night.

Mr Brown will tell MPs that he will not relax his tough grip on the economy. He will vow not to repeat the mistakes of the "boom and bust" of the 1980s, when taxes were cut as the economy overheated.

Yesterday's figures showed the UK had a £2.7bn public sector net cash surplus last month, a record for February and almost twice the City's £1.5bn forecast. It leaves a cumulative total for the 11 months to February of £15.7bn, the best since 1988-89. Although the figures will help Mr Brown to cut taxes while increasing public spending, City analysts believe he will avoid anything that would boost the economy further and force the Bank of England to raise interest rates.

Most analysts expect the Chancellor to unveil a modest tax cut of between £2bn and £3bn to blunt Tory accusations that the tax burden has risen under Labour. There are also likely to be politically important increases in spending on health and education.

Separate figures showed the housing market remained strong, hinting that homebuyers are snapping up properties after speculation that stamp duty would be increased in the Budget. Mortgage lending rose £1.68bn, its strongest since September and about 8 per cent above the monthly average, the British Bankers Association said. "It may be that interest rate rises and fears about possible changes in stamp duty are encouraging customers to borrow before funding costs rise further," said Tim Sweeney, the BBA director-general.

The Royal Institute of Chartered Surveyors said the number of home sales surged 9 per cent over the three months to February. Surveyors also reported an upturn in the number of homes on their books.