THE British Chancellor, Mr Kenneth Clarke, has made a final pitch to recover the Conservative government's reputation for economic competence. But his insistence on a "virtuous budget" left Tories doubting its impact on the party's re-election prospects.

"Good economics is good politics," Mr Clarke told MPs at the end of a budget statement which cut one penny off the standard rate of tax, increased thresholds and allowances, froze duty on wine and beer, cut the price of spirits, promised relief for small businessmen and increased spending on education, crime and the national health service.

But as the Labour leader Mr Tony Blair hailed "the last gasp budget of a government whose time is up", the former leadership challenger Mr John Redwood typified the muted reaction on the Tory benches. Mr Redwood said the Chancellor had made "the right judgment" in a budget whose very virtue was blown by Monday's unprecedented leak to the Daily Mirror.

Mr Redwood's reaction reflected the Chancellor's dilemma in seeking to outmanoeuvre a Labour Party which has been riding high on the charge of broken tax promises.

"It is not an election-winning budget in the sense that it doesn't give away an awful lot of money that we can't afford to give away. That would have been wrong," he said.

Mr Clarke said he could have cut the standard rate by two pence.

But he claimed it was now at its lowest "in 60 years" and said he was planning for "the next five years, not just the next five months".

The Conservatives were on target for their declared goal of a 20p standard rate, and Mr Clarke had widened the bands to make that applicable already to one quarter of all tax payers.

In the meantime, he recognised the high priority taxpayers gave to public services - announcing a £1.6 billion increase in health service funding, with an extra £830 million for schools and £450 million on law and order.

And still with one eye on the Conservative electorate, he announced further moves toward the elimination of inheritance tax, a crack down on tax cheats, and a cut in payments to single parents.

Mr Clarke said: "We want an economic policy that will go on delivering our enviable combination of rising prosperity, low inflation and more jobs.

But last night some political strategists were wondering why Mr Clarke had given such priority to a dramatic predicted cut in the PSBR from £26 billion this year, to £19 billion next.

And while the Liberal Democrats repeated they would oppose yesterday's tax cut, some Tories feared the Chancellor had presented Labour with no real tax hurdle when the Commons divides on the Finance Bill.

Mr Blair, opening the Commons debate, went straight on the offensive - branding the budget a "give-with-the-one-hand, take-with-another" package. He set the tone for months of electoral battle saying: "One thing we know for certain is that tax will be higher at the next election than at the last." By