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DARLING CUTS GROWTH FORECASTS AMID ECONOMIC TURMOIL

TURBULENT TIMES: Darling has cut growth

Wednesday March 12,2008

By Julia White for express.co.uk

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ALISTAIR Darling was forced to slash his growth forecasts amid difficult times for Britain's economy.

The Chancellor's first Budget today saw growth forecasts cut for the second time in six months.

As the effects of the US credit crunch linger on, Darling slashed forecasts to between 1.75 per cent and 2.25 per cent for 2008 - following a similar move in October's pre-Budget statement.

And he also cut his predictions for next year for the first time.

The Chancellor now expects the economy to grow by between 2.25 per cent and 2.75 per cent in 2009 - compared with the 2.5 per cent to 3 per cent anticipated six months ago.

There was more bad news for the economy with the announcement that Government borrowing is set to soar.

In 2008/09 borrowing is predicted to balloon to £43 billion compared with the £30 billion originally predicted a year ago, with further hikes in the three years following.

CBI director general Richard Lambert said: “On the surface there are no nasty surprises, but his growth assumptions are optimistic and leave him with little room for manoeuvre should things take a turn for the worse.

“Borrowing also looks set to rise by a further £20 billion over the next four years, which is a cause for concern.”

But despite the tougher economic conditions, Darling claimed that the Government would meet its two fiscal rules.

He said the sustainable investment rule, under which debt as a percentage of GDP must not exceed 40 per cent, will be met over the next six years.

But these predictions do not take account of the estimated £100 billion of liabilities taken on to the public balance sheet by the nationalisation of lender Northern Rock.

And he also said the Government was on track to meet the “golden rule”, which dictates that the Government only borrows to invest over the economic cycle, with the current budget returning to a £4 billion surplus in 2010/11.

But inflation is also expected reach 2.5 per cent this year, above the official 2 per cent target, as rising oil, food and household bills add to price pressure.

MORE LIVE BUDGET 2008 COVERAGE ON EXPRESS.CO.UK ...

* VIDEO: WATCH THE BUDGET NOW...
* THE BUDGET IN PICTURES...
* THE FULL BUDGET STATEMENT...
* BUDGET 2008 HIGHLIGHTS...
* WHAT THE BUDGET MEANS FOR YOU...
* HAVE YOUR SAY ON THE BUDGET...
* TORY RESPONSE...
* LIB DEM RESPONSE...
* DARLING ACCUSED OF GREEN-COP-OUT...
* GROWTH FORECASTS CUT...

*** READ ALL THE BUDGET REACTION AND ANALYSIS AT EXPRESS.CO.UK/MONEY ***