The Chancellor used the Budget speech to cut his growth forecasts. The economy is now expected to contract by 3.5pc this year, but grow 1.25pc in 2010. This would mean growth starting towards the end of this year. The IMF are more pessimistic forecasting negative growth in 2010 of -0.4% (see – slow economic recovery) + (dismal forecasts)
– Public sector net borrowing will be £175bn this year, 12.4pc of GDP. From 2010, it will be £173bn (11.9pc of GDP), then £140bn (9.1pc), £118 bn (7.2pc) and £97n (5.5pc). Other forecasts predict even higher borrowing if the government fail to achieve its forecasts for economic recovery.
– National debt as a percentage of GDP, including the cost of stabilising the banking system, will increase from 59pc this year to 68pc. It will rise to close to 80pc by 2013/14 – twice the level Labour inherited in 1997.
– RPI inflation is forecast to remain negative, falling to minus 3pc by September, before moving back above zero next year.
– CPI Inflation is expected to continue falling sharply, reaching 1pc by the end of this year. However, CPI deflation is not forecast at the moment.
– The UK’s current account deficit is expected to halve within four years.
Key Budget Measures
– A new 50pc Higher Income tax rate for those earning more than £150,000 to take effect from next April (2010)
– There will be no income tax increases this year.
Fuel duty will increase by 2p per litre in September and then by 1p a litre above indexation each April for the next four years.
– Alcohol duties will go up by 2pc from midnight tonight.
– Tobacco duty will rise by 2pc from 6pm tonight.
– Sin taxes are forecast to raise over £6bn by 2012.