BRITISH BUDGET:CHANCELLOR ALISTAIR Darling hopes to have avoided a pre-election crisis over the economy by raising taxes in his debut budget which he says equips Britain for tough times ahead.
Mr Darling cut projected growth rates for the second time in six months yesterday and raised borrowing as well as tax, while assuring MPs the UK was "more resilient and more prepared to meet future shocks" in the global market.
However, the Conservatives described it as "a bad news budget" that would "kick" British families already down as a result of rising mortgage, fuel and foods costs.
The chancellor raised duty on alcohol, cigarettes and high-polluting cars.
While delaying a 2p rise in fuel duty until October, Mr Darling announced a 6 per cent increase in alcohol tax - with a 2 per cent annual rise for the next four years - putting an immediate 4p on the price of a pint of beer, 3p on cider, 14p on a bottle of wine and 55p on spirits.
He also added 11p to the price of a packet of cigarettes and put 4p on a pack of five cigars, saying he would use these "responsible" measures to fund a fresh drive to lift a further 150,000 children out of poverty, with a planned increase in child benefit for a first child now effective from April 2009 - a year earlier than planned.
With Britain facing its biggest slowdown since Labour came to power in 1997, the chancellor confirmed that public borrowing would have to further rise to £43 billion next year, some 2.9 per cent of national income, rather than fall to £36 billion as he had previously hoped.
Promising "no return to the inflation rates of the early 1990s", Mr Darling said he was writing to the Bank of England to keep to a 2 per cent target rate. From the 2.5-3 per cent predicted in Gordon Brown's budget this time last year, Mr Darling cut the 2008 growth forecast to 1.75-2.25 per cent, while predicting it would return to its long-term average of 2.25-2.75 per cent. However, as Conservative leader David Cameron warned the government had left itself "no room for manoeuvre" on taxes or interest rates, Howard Archer, chief UK economist of Global Insight suggested the chancellor's revised growth forecasts "still looked too high".
Mr Archer said: "Mr Darling highlighted weaker global growth, financial market turmoil and tighter lending conditions influenced markedly by the US crisis. He also argued that UK growth is likely to be higher than in the euro zone, US and Japan in 2008.
"This skates over the fact that the UK economy has serious problems of its own - notably including high household debts and an over-extended housing market," said Mr Archer. With a number of independent forecasters less optimistic than the chancellor, John Hawksworth of PriceWaterhouseCoopers said borrowing could easily rise still further if growth was slower than Mr Darling was now predicting.
The Tory leader chided the chancellor for not mentioning that the current account deficit was set to rise to a record £72 billion and that the rate of growth of business investment was "slumping by two thirds".
Darling's budget: the main features
ECONOMY
Growth forecasts
UK economy grew by 3 per cent in 2007. The growth forecast for this year has been lowered to between 1.75 and 2.25 per cent. Growth for 2009 is forecast to be 2.25 to 2.75 per cent, rising to between 2.5 and 3 per cent in 2010.
Inflation
Recent increases in world food and energy prices will fuel inflation in 2008, but it will return to target in 2009. Inflation target for the consumer price index remains at 2 per cent.
Government debt
Debt has fallen to 36.6 per cent of gross domestic product. Fiscal rule to borrow only for investment to remain. Net borrowing for 2008 is forecast at £36 billion. Borrowing to rise to £43 billion next year, or 2.9 per cent of national income. The government's borrowing deficit in 2007-08 will be £8.8 billion, then - £10billion in 2008-09, followed by - £4 billion in 2009-10. A surplus of £4 billion was forecast for 2010-11, followed by an £11 billion surplus in 2011-2012 and £18 billion in 2012-13
PUBLIC SPENDING
Public spending to grow by 2.2 per cent in the next three years.
BUSINESS
New flat rate capital gains tax charge of 18 per cent for individuals to be introduced from April as previously announced, up from 10 per cent.
ENVIRONMENT
Government to take advice on whether carbon emissions reduction target can be raised to 80 per cent by 2050. Climate change levy will increase in line with inflation from April.
Reform of the North Sea fiscal regime to encourage investment.
"Carbon Budgets" to be issued alongside regular budgets from 2009.
TAX
Changes to income tax confirmed for April. Basic rate drops from 22 per cent to 20 per cent and the 10 per cent band is abolished.
New charge on non-domiciled residents to be introduced from April and to remain in place for this and the next parliament.
Beer duty to increase by 4p per pint, wine up 14p a bottle, cider up 3p a bottle and spirits up 55p a bottle.
Tobacco duty to rise tonight by 11p per packet of 20 cigarettes and 4p for five cigars.
MOTORISTS
The 2p per litre fuel duty increase is postponed until October 2008. Fuel duty up by half a penny per litre in 2010.
Reform to road tax planned for 2009. Vehicle tax rates will depend on vehicle emissions from 2010. Low-polluting cars will pay no tax for the first year from 2010.
EMPLOYMENT
Public sector employment has fallen in the past year, private sector employment has risen to record levels.
Some £60 million to be spent over the next three years to encourage people to enter work and progress. (Financial Times service)
