The British government cut its deficit forecasts and announced a 2.5 billion pound ($3.7 billion) one—off growth package for the economy as the centre-piece of its annual budget on Wednesday - its last before an anticipated tough national election.
Treasury chief Alistair Darling, fulfilled his warnings that there would be few giveaways in the spending plan as the government seeks to cut a record budget deficit, but did offer some voter—friendly measures such as a reduction in taxes for first—time home buyers.
“This will be a budget to secure the recovery, tackle borrowing and invest in our industrial future,” Mr. Darling told lawmakers in the House of Commons. “It will continue targeted support for business and families where and when it is needed.”
Lagging behind the main opposition Conservative Party in the polls for an election that is expected on May 6, the Labour Party government is trying to spin its hands—tied position into an example of steady stewardship in times of austerity.
Mr. Darling stressed that the government’s actions during and after the financial crisis had meant that Britain’s 19—month long recession, which ended in the final quarter of last year, did not slide into a depression.
The government maintained its forecast for economic growth this year of 1—1.5 percent, but lowered next year’s forecast slightly to 3—3.5 percent from 3.5 percent.
“The recovery is still in its infancy and there are still tough choices ahead,” Mr. Darling said, adding that financial markets are “still febrile” and that recovery “is not preordained.”
Labour has resisted calls to cut stimulus measures faster, by reducing spending and hiking taxes, to help cut the budget deficit, arguing that could send the economy back into a dreaded double—dip recession.
But Mr. Darling did lower government’s forecasts for the deficit out to 2014/15, citing stronger tax receipts from the recent tax on bankers’ bonuses and strong sales tax contributions.
Borrowing would reach 167 billion pounds ($249 billion) this year, he said, down from the previously forecast record 178 billion pounds.
A series of reductions in the next few years would leave the deficit 100 billion pounds lower in 2014/15 than previously thought, he added.
The credit rating agencies have issued muted warnings over Britain’s fiscal position and the status of the country’s “triple—A’ sovereign debt rating, which allows the country to borrow relatively cheaply.
The opposition Conservative Party argues that fiscal tightening won’t endanger economic recovery if it is based on lower public spending, rather than higher taxation.