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Darling set to cut growth forecasts

Chancellor Alistair Darling looks set to cut growth forecasts and ramp up borrowing in his first budget on Wednesday as the economy faces its most challenging test in more than a decade.

Posted: Wednesday, March 12, 2008, 7:35 (GMT)
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Chancellor Alistair Darling looks set to cut growth forecasts and ramp up borrowing in his first budget on Wednesday as the economy faces its most challenging test in more than a decade.

In the job since last June, Darling has had a tough time dealing with a global credit crunch 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 polls ahead of an election expected some time next year.

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.

He may delay a 2 pence hike in fuel duty planned for April to autumn, a government source told Reuters on Friday, given oil prices topping $100 a barrel are adding to the consumer burden. Such a move has cost some 400 million pounds in the past.

While the scope for much largesse beyond that is limited, Darling looks sure to find some cash for tackling child poverty and increasing winter fuel allowances for pensioners.

The 54-year old Scot will almost certainly blame the global downturn for this year's slowdown when he gets up in parliament at 12:30 p.m. and is expected to nudge down his growth forecast for this year from the current 2.0 percent to 2.5 percent range.

"The gloomier economic outlook suggests the Treasury's 2008/09 and 2009/10 borrowing forecasts will be raised significantly," said Philip Shaw, chief economist at Investec.

Analysts polled by Reuters poll on Tuesday expected the Treasury to revise up the net borrowing forecast to 40 billion pounds in the next fiscal year and 39 billion in 2009/10 - from the 36 billion and 31 billion pound projections made in October.



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