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BUDGET '09: UK PLC debt far worse than predicted

Date: 22 April 2009   |   Author: Rupert Saunders

Alistair Darling has delivered the last Budget before the general election

In today's Budget speech Chancellor Alistair Darling told MPs that the UK deficit for this financial year will reach £175bn - almost 50% greater than his estimate of £118bn in the Pre-Budget Report last November.

The deficit is predicted to continue at these high levels for several years to come, estimated at £173bn in 2010 and £130bn in 2011.

The Government does not expect to balance the country's books until 2017.

Chancellor Darling defended the high levels of borrowing by arguing that continued Government spending was needed to avoid choking off any signs of economic recovery. He warned of the effect of doing "too little, too late".

His prediction that the UK economy would start to grow "towards the end of this year" is more optimistic than most. Other economists are not predicting a recovery until mid-2010.

Darling also suggested that after a 3.5% contraction in gross domestic products this year, it would pick up by 1.25% in 2010 and then by 3.5% "from then on".

The inflation rate (CPI) is expected to be 1% by the end of this year while the retail price index (RPI), which includes mortgage interest rates, is expected to be -3% by September before recovering to zero next year.