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BUDGET 2010: Borrowing not as high as feared

Date: 24 March 2010   |   Author: Rupert Saunders

The Chancellor of the Exchequer has revised his forecasts for growth in the UK economy "down slightly" to bring them into line with predictions from the Bank of England. Even so, he was able to confirm that government borrowing over the next few years will not be as high as originally feared.

Darling said that tax revenues, particularly in the last three months, were "better than expected" thanks to higher company profits and employment levels, while spending remained in line with forecasts.

The government now expects the UK economy to grow by 1% to 1.5% this year and then by 3% to 3.5% in 2011. The inflation rate, currently at 3%, is expected to drop to 2% by next year and the Chancellor confirmed that 2% would remain the target for the Bank of England policy committee in setting interest rates.

Annual net borrowing this year will be £167bn (it was forecast at £178bn) and will drop to £163bn for 2010/11 and £131bn for 2011/12. The target is to bring it down to £74bn by 2014/15, at which figure it will be 4% of GDP.

If the government is able to keep inflation under control (despite rising fuel prices) then the prospects are that interest rates will remain at their current low level for some time to come.