Darling forced to revise economy contraction
Darling forced to revise economy contraction in pre-Budget report
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By Adam Leveridge. |  |
Wednesday, 09, Dec 2009 05:19
By Richard James.
Alistair Darling has revised his prediction for the degree to which the UK economy will shrink this year in his annual pre-Budget report.
Delivering the report to the House of Commons this afternoon the chancellor said his previous prediction of a 3.5 per cent contraction had been revised due to "severity of the recession", with 4.75 per cent shrinkage in 2009 now expected.
Mr Darling said though he expected the economy to grow between one and 1.5 per cent in 2010.
He also said inflation would hit three per cent before hitting 1.5 per cent by the end of next year.
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Surprisingly he did not announce a windfall tax in relation to bankers' bonuses, but instead unveiled a one-off levy of 50 per cent to be paid on any bonuses over £25,000 to be paid by the banks not employees.
The money will be used to help pensioners, as well as getting young people into work.
In bad news for retailers the chancellor said VAT would rise back to 17.5 per cent on January 1st, following the cut to 15 per cent announced in his April budget.
There would be no other changes to VAT in the future, however, he said.
Mr Darling also revised the impact on public purse on bank bailouts to £10 billion, down from £50 billion.
In terms of the country's debt, Mr Darling altered his prediction for the country's budget deficit from £175 billion for 2009 to £178 billion.
The chancellor said the figure would drop steadily from this year and said debt as a share of GDP will peak at 78 per cent in 2014-15, which will be in line with other global economies.
Now is not the time to cut spending, he told MPs, and said total public spending would grow by 2.2 per cent in real terms to £31 billion next year.
Other major announcements included the declaration that inheritance tax will be frozen at £325,000 for 2010, a further £2.5 billion will be set aside for operations in Afghanistan and a scrappage scheme for boilers which he said would help some 125,000 homes.
Mr Darling said the measures he had announced would secure recovery and reduce borrowing.
He said it was about "securing recovery, not wrecking it".
Conservative shadow chancellor George Osborne though countered Mr Darling's announcements, saying: "We were promised a pre-Budget report and what we got was a pre-election report."