The UK is enjoying its longest period of sustained low inflation since the 1960s, interest rates are at their lowest for the longest period since 1970 and there is a surplus in public finances.
Historically, this would have provided an opportunity for a Chancellor to take a few risks to produce a desired election result. But Gordon Brown has sought to dampen hopes of a pre-election spending spree.
He argues that a disciplined approach to tax and spending is the best way to achieve a stable economy.
Brown's fifth Budget is therefore likely to include targeted tax cuts. Likely beneficiaries are families, pensioners, low-paid workers and savers and maybe drivers and farmers. With this in mind, I expect:
l Children's tax credit (which kicks in on April 6) – a reasonable increase of as much as an extra £1.50 a week, together with further initiatives to ensure the take-up of this benefit.
l Pensions – above-inflation increases this year after last year's much-derided 75p a week increase.
l Income tax – an above-RPI increase in the 10 per cent band to benefit those on low incomes and an above-RPI expansion of the basic-rate band. A further cut in the basic rate may be in the wind to launch the election campaign with a bang.
l Stamp duty – a possible reduction in the rate paid on share purchases, perhaps halving it from 0.5 to 0.25 per cent, to encourage investing.
I also expect changes to the long-term care rules and inheritance tax levels.