British finance minister Alistair Darling cut growth forecasts and ramped up borrowing today as the economy faces its biggest challenge in over a decade and his government slides in the polls.
In his first budget, Darling pointed to the global credit crisis as he lowered expected UK economic growth for this year to a range of 1.75-2.25 per cent and for next year to 2.25-2.75 per cent.
"We have seen significant disruption across many credit markets with a number of them barely functioning at all. And since the turn of the year, global stock markets have also been affected," the 54-year-old Scot told parliament.
"This poses a major risk to the world economy. And so we welcome yesterday's commitment by the world's central banks including, the Bank of England to address these concerns."
Top central banks agreed yesterday to pump hundreds of billions of dollars into jammed up money markets, labouring under a global credit crunch, to free them up.
In October's pre-budget report, Darling forecast growth at 2.0-2.5 per cent in 2008 and 2.5-3.0 per cent in 2009.
Darling said government borrowing would hit £43 billion in the coming financial year and £38 billion the year after, well above the public sector net borrowing of £36 billion and £31 billion that he forecast in October.
In the job since last June, Darling has had a tough time dealing with the credit crisis and Britain's first bank run in more than a century, which resulted in the government having to nationalise 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 opinion polls.
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.