Budget to target soaring public debt
LONDON: The government will unveil an eagerly awaited budget on Wednesday as it seeks to tame soaring public debt and shore up support with a general election just weeks away.
Chancellor Alistair Darling will deliver what could be his last budget at 12:30 pm, with polls showing the Conservatives could win a slender victory in elections expected on May 6.
The 2010/2011 budget is framed against a gradual economic recovery after a record recession that ended in the fourth quarter of 2009.
"Of course we've got to take action, and we will take action to get our borrowing down, halving our borrowing over a four-year period," Darling said in a broadcast on the Treasury's website on Tuesday.
"We've got to have a budget that ensures we have growth ... my budget will contain measures to get that growth going," Darling added.
Improving tax revenues and better-than-expected borrowing in February have given Darling room for small give-aways, according to economists.
Public borrowing in the 11 months to February hit a record 131.9 billion pounds, official data showed last week.
But downward revisions to previous months left borrowing on course to undershoot the official target of 178 billion pounds in the current fiscal year to March 2011.
"All eyes will be on Darling's projections for public sector net borrowing where the forecast for 2009/10 may be undershot by an appreciable margin," said Lloyds Banking Group economist Kenneth Broux.
"Ahead of an election, it may be that savings are directed towards various initiatives, perhaps measures aimed at helping the long-term unemployed.
"But, as in other countries, fiscal consolidation is still the name of the game."
Prime Minister Gordon Brown's handling of the economy has become a central issue for voters amid fears of a "double dip" recession.
Whichever party wins power in May, economists agree that spending cuts and tax hikes are urgently required to fix Britain's enormous public debt, which has ballooned in the face of a deep downturn and massive banking bailouts.
Royal Bank of Scotland economist Ross Walker said Darling may include minor voter-friendly give-aways, despite his recent assertion that this will not be a "Christmas tree" budget.
"The expected undershoot in 2009/10 borrowing may allow 2.0-3.0 billion pounds of give-aways," said Walker.
In the run-up to the budget, reports said that Darling may back a globally co-ordinated levy on the banking sector, which sparked the global financial crisis and dragged the world into recession.
Conservative leader David Cameron has already pledged to impose a US-style tax on banks to claw back state cash spent on bailing them out.
The government has faced vocal calls from at home and abroad to get the public finances in order.
The European Commission attacked Darling last week over the "absence of detailed departmental spending limits" in plans to curb the record deficit, which is forecast to soar above 12 percent of gross domestic product this year.