Britain cuts its growth forecasts

British Chancellor of the Exchequer Alistair Darling cuts his borrowing and growth forecasts in the government's pre-election budget.

British Chancellor of the Exchequer Alistair Darling cut his borrowing and growth forecasts today in a pre-election budget that he said would help secure the nation's recovery from a record recession. Mr Darling also announced a £2.5bn (Dh13.7bn) growth package to help strengthen recovery, as the Labour government was fighting to stay in power at a general election expected on May 6. "This will be a budget to secure the recovery, tackle borrowing and invest in Britain's industrial future," said Mr Darling in his budget speech before parliament.

"It will set out how the government sticks to its plan to halve the deficit in four years," added Mr Darling in his last budget before a general election which Labour is battling to avoid defeat to the main opposition Conservatives. The chancellor cut his economic growth forecast for 2011 to 3.0-3.5 per cent but held his prediction of 1.0-1.5 per cent expansion this year. And he also trimmed his official borrowing target to £167bn for the current financial year which runs until the end of this month. That was lower than the previous estimate of £178bn.

Economists agree that Britain needs deep public spending cuts and higher taxes to fix public debt, which has surged to record levels due to huge banking bailouts and recession-hit taxation revenues. "Borrowing is lower than forecast last year but the recovery is still in its infancy and there are still tough choices ahead," Mr Darling added, hinting at possible future spending cuts, after Britain escaped recession late last year.

To aid the battered economy, Mr Darling unveiled the growth package to "help small business, promote innovation, invest in national infrastructure". And to boost the battered housing market, he lifted the lower tax threshold for property purchases to £250,000, from £125,000 previously. Financial markets will likely focus on the government's attempts to slash a record public deficit.

Darling said he wanted to cut the deficit to 4.0 per cent of GDP by the 2014-2015 financial year. The chancellor added that the government had so far raised £2bn in a bonus "supertax" that was slapped on bankers' bonuses last December. He added that the Treasury has also received more than £8bn in fees and charges from taxpayer support given to the banking sector. After a series of multi-billion-pound rescue packages, the government now owns 84 per cent of the Royal Bank of Scotland and 41 per cent of Lloyds Banking Group, while it nationalised lender Northern Rock outright.

"We will sell out shares in RBS and Lloyds, as well as Northern Rock in a way that maximises returns to the taxpayer," added Mr Darling. * AFP