UK
Written on March 13, 2008
British finance minister Alistair Darling looks set to cut growth forecasts and ramp up borrowing in his first budget on Wednesday as the economy faces its most challenging test in more than a decade.
In the job since last June, Darling has had a tough time dealing with a global credit crunch and Britain’s first bank run in more than a century, which resulted in the government having to nationalize the country’s fifth-biggest mortgage lender.
Business has also reacted angrily to his plans for capital gains tax reform and imposing a levy on rich foreigners living in Britain. The ruling Labour Party is now trailing in the polls ahead of an election expected some time next year.
But worsening public finances mean Darling’s hands are tied on offering much in the way of sweeteners to an electorate growing disenchanted with his and Prime Minister Gordon Brown’s economic stewardship.
He may delay a 2 pence ($0.04) hike in fuel duty planned for April to autumn, a government source told Reuters on Friday, given oil prices topping $100 a barrel are adding to the consumer burden cash til payday loan. Such a move has cost some 400 million pounds ($805 million) in the past.
While the scope for much largesse beyond that is limited, Darling looks sure to find some cash for tackling child poverty and increasing winter fuel allowances for pensioners.
The 54-year old Scot will almost certainly blame the global downturn for this year’s slowdown when he gets up in parliament at 8:30 a.m. EDT and is expected to nudge down his growth forecast for this year from the current 2.0 percent to 2.5 percent range.
“The gloomier economic outlook suggests the Treasury’s 2008/09 and 2009/10 borrowing forecasts will be raised significantly,” said Philip Shaw, chief economist at Investec.
Filed in: business.