CHANCELLOR Gordon Brown set out an upbeat picture of the prospects for the economy as he prepared for an expected general election next year.

In his annual Pre-Budget Report, he predicted another year of strong growth next year with the economy set to grow by between 3% and 3.5% next year.

"Britain will extend the longest period of uninterrupted growth in the industrial history of the country," he told the Commons.

Among the first announcements in the statement was a widely-predicted freeze on fuel duty.

He also promised a '105 million cash injection for counter-terrorism and security measures.

Mr Brown insisted that he would continue to meet his own fiscal rules on tax and spending, of delivering balanced budgets over the economic cycle and keeping debt below 40% of GDP.

He said that net borrowing this year had come in at '35 billion - '2.5 billion less than he predicted at the time of the Budget in March.

Borrowing next year will be slightly higher than he forecast, at '34 billion - '1 billion more than he had predicted - falling back to '33 billion, '29 billion, '28 billion, '24 billion and '22 billion in the following years.

Mr Brown set out a 10-year childcare strategy for the next Parliament if Labour are returned at the next election.

It includes a '285 million cash injection to extend paid maternity leave from six months to nine, with parents able to transfer leave from the mother to the father.

He also promised an extension of childcare with free nursery education for three and four-year-olds increased to 15 hours from April 2007.

And he said that funds would be provided to keep schools open from 8am to 6pm to look after children while their parents are at work.

He said that taken together, the measures would create a 'welfare state that is truly family-friendly for the first time in its history'.

He also announced a cash hand-out for older pensioners, with payments of '250 for the over-70s and '350 for the over-80s on top of the winter fuel allowance.

In a further move, Mr Brown said he was providing an extra '1 billion for local councils in order to stave off the prospect of hefty council tax rises ahead of the election.

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