Darling spells out scale of slump
British Chancellor Alistair Darling today acknowledged that Britain was facing the deepest recession since the Second World War as he slashed his economic forecasts.
Delivering his second Budget, Mr Darling warned that output would shrink by 3.5% this year – more than doubling his previous forecast.
And he revealed that borrowing this year would soar to a record £175bn (€195bn) - with another £173bn (€193bn) in 2010 – as the country battled with the worst global downturn in 60 years.
However, he insisted that he would get the public finances back on track - halving borrowing within four years as the economy began to recover from the end of the year.
The Chancellor made clear that his plans depended on a rapid economic bounce-back – with a forecast of 1.25% growth next year rising to 3.5% in 2011.
Nevertheless, he admitted that the economy would first face of period of deepening deflation with the Retail Price Index falling to a low of minus 3% by September.
The Chancellor warned that rebuilding the public finances would take ``tough decisions''
He said the planned new top income tax rate of 45% on incomes above £150,000 (€167,500) will be increased to 50% and take effect from next April – a year earlier than planned.
And from April 2011, pension tax relief would be restricted for those with incomes over £150,000 (€167,500).
Mr Darling defied calls from transport and motoring groups for another freeze on fuel duty which will rise by 2p a litre in September and then by 1p a litre above inflation each April for the next four years.
Drinkers and smokers will also be hit with alcohol duties to go up by 2% from midnight tonight, while there will be an increase in tobacco duty of 2% from 6pm tonight.
The Chancellor confirmed he would attempt to kick-start the ailing motor industry by introducing a car-scrappage scheme.
Anyone with a car registered before December 31, 1999 will get a cash incentive of £2,000 (€2,300) to trade in their old vehicle for a brand new one.
A total of £1,000 (€1,150) will come from the Government and the remaining £1,000 (€1,150) from car companies, with participants being able to buy any new vehicle, including small vans, rather than just low-pollution models.
Around £300m (€335m) has been put aside by the Government to fund the scheme which is expected to come into effect as early as mid-May and will last until the grant runs out, thus enabling 300,000 consumers to benefit.
