Budget 2009: Public borrowing will hit 80%
By politics.co.uk staff
The chancellor announced in his Budget today that public sector borrowing would reach £175 billion this year, or 12 per cent of GDP.
That is far higher than the predicted £118 billion made in the pre-Budget report in November and higher than the £160 billion predicted by many independent financial groups.
He said public borrowing would increase in the following years by £173 billion, £140 billion, £118 billion and £97 billion.
The UK’s public sector net debt will increase from 59 to 68 per cent next year with the figure rising to 79 per cent by 2013-14. But from 2015-16 onwards it will begin to fall.
As expected the chancellor also announced he expected the economy to shrink by 3.5 per cent in 2009 which would represent its worst performance since 1945.
He then expected it to pick up towards the end of this year and projected a 1.25 per cent growth by the end of 2010 with growth at 3.5 per cent each year thereafter.
Capital investment will continue at “historically high levels” until 2012 which ties in with a previous announcement that £3 billion of investment will be brought forward to this year from 2010-11.
Cigarette, alcohol and fuel taxes are set to rise. From six o’clock tonight tax on tobacco will rise by two per cent with a two per cent rise on alcohol tax coming into force at midnight.
Fuel duty will rise by 2p per litre from September.
One of the key issues for this budget was the need to make savings without making cuts and the chancellor announced he would be able to make £9 billion worth of efficiency savings on top of current levels.
However, this could not stave off the need to cut public spending which will reduce by 1.1 per cent next year, down to 0.7 per cent for 2011-12.
