CHANCELLOR Gordon Brown received a cautious welcome from an underwhelmed business community reacting to yesterday's Budget.

Industry leaders in the region approved of measures to slash public sector spending, which has long been considered extravagant by the private sector.

There was additional support for efforts to improve science, business support and training.

Alan Clarke, One NorthEast chief executive, said: "We particularly welcome the Chancellor's focus on increasing science and research spending.

"The North-East is ideally placed to benefit from this and is, indeed, taking a national lead in focusing on scientific research to benefit our economy, through programmes such as One NorthEast's Strategy for Success, which has five centres of excellence at its heart to exploit the best of our universities' research and development."

The absence of tax increases was greeted with delight, but there was cynicism from certain quarters, who are suspicious that there could be a sting in the tail in years to come.

George Cowcher, chief executive of the North-East Chamber of Commerce, said: "We are thankful that Chancellor Gordon Brown has not raised taxes or used the business community as an easy target to raise finance.

"We are also pleased that he chose not make increases to vehicle excise duty or the climate change levy. But this was clearly a holding operation by the Chancellor, with a few crumbs of comfort thrown in for smaller businesses in terms of extended investment allowances for equipment and tax relief on venture capital.

"Overall, the 2004 Budget makes little difference to North-East business and does nothing to stimulate and encourage growth in the region's industry and commerce."

Alan Hall, northern director of the Engineering Employers' Federation, welcomed an extension in the scope for rebates to the levy.

He said: "Business will welcome the much-needed action to improve efficiency in the public sector and to curb the rate of growth in public spending. However, it is essential that the Chancellor's efficiency measures work if we are to avoid the need for higher borrowing or tax increases later on.

"Manufacturers, in particular, will breathe a sigh of relief not to be hit by any major tax increases, which could snuff out the benefits of an improving economy."

There was little joy for small business people, according to Peter Troy, chairman of the Darlington branch of the Federation of Small Businesses.

He said: "This Budget was lacklustre and can be marked down as a lost opportunity. One is hard-pressed to find an item that is relevant to the small business community."

Mr Brown's announcement that he would implement recommendations made in the Lyons Report to devolve 20,000 civil service jobs to the regions was a positive move, but many commentators were disappointed not to hear more details about where the work would go.

Mr Cowcher said: "We are encouraged that the Government has confirmed its intention to act on the Lyons Review recommendations - something for which we were pressing strongly in the hope of bringing more jobs to the North-East.

"This is a massive opportunity which the region must grasp with both hands."

Bob Gibson, chairman of the North-East Assembly, said: "The intention to disperse public sector employment from London to the regions will make a significant contribution to achieving the Government's objectives of reducing regional disparities."