BUDGET 2008: UK growth forecasts cut
12 March 2008
Author: Rupert Saunders
For his first Budget speech Alistair Darling appeared to have adopted some of the previous Chancellor of the Exchequer's rhetoric, mentioning the word 'stability' no fewer than five times in the first two minutes.
This led one national commentator to speculate that the speech had actually been written by his boss and predecessor Gordon Brown.
However, in the face of a global slowdown, the new Chancellor was forced to cut his growth predictions for the UK economy. He is now forecasting a 1.75% to 2.25% growth rate in 2008. This is 0.25% slower than he predicted in November and closer to current City forecasts of 0.8%.
In 12 months he expects growth to accelerate to 2.5%-2.75% in 2009 and 2.5%-3.0% in 2010. This would make the British economy one of the fastest growing in the developed world.
Although admitting that "inflation will rise in the short term", Darling said the Government wanted to stick to its current target figure of 2%, and he will be writing to the Governor of the Bank of England to emphasise that fact.
This suggests that the Bank of England will find it more difficult to pursue a policy of interest rate cuts.
Darling predicted inflation would "return to target by 2009 and remain on target thereafter".
Government borrowing is set to rise to 2.9% of national income this year but will fall back again from 2009.