Darling Says U.K. Economy Will Recover From Recession Next Year
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By Thomas Penny
Dec. 9 (Bloomberg) -- Chancellor of the Exchequer Alistair Darling said the U.K. economy will recover from its longest recession on record next year as the government’s stimulus measures take hold.
The finance minister forecast growth in 2010 to between 1 percent and 1.5 percent, the same as he estimated in March. He expects growth of about 3.5 percent in 2011 and 2012. For 2009, Darling forecasts the economy will shrink by between 4.75 percent, deeper than his March projection for a contraction between 3.75 percent and 3.25 percent.
Trailing in opinion polls before an election that he must hold by June, Prime Minister Gordon Brown is balancing the need to clamp down on a record budget deficit while extending support to voters struggling in the deepest recession since 1980.
“We must continue to support the economy until the recovery is established,” Darling said in a speech in Parliament in London today. “The choices are between going for growth or putting the recovery at risk. To reduce the deficit while protecting front-line services or cuts, which put these services in danger.”
Darling, delivering his pre-budget statement, will announce his deficit projections later in the speech. In March he expected a shortfall of 175 billion pounds ($285 billion) in the current fiscal year, about 12 percent of gross domestic product and the most in the Group of 20 nations.
Tax Plans
He’s also planning to raise taxes on bonus pay earned by bankers and to maintain spending on health and education programs popular with voters, Treasury officials say.
He confirmed he’d return value added tax to 17.5 percent at the end of this year from 15 percent. He also extended tax relief on empty properties, cut duties on bingo gaming and raised the basic state pension 2.5 percent from April. He also will increase disability benefits by 1.5 percent.
Brown’s Labour government and David Cameron’s Conservatives both have promised measures to bonus payments in the City, London’s financial district. Where the two parties diverge is on just how quickly the government should curb the deficit.
“We can’t solve the problem of the deficit straight away, but what there’s an absence of is a credible plan,” Conservative leader David Cameron said yesterday. “I don’t think anyone’s going to be impressed with a plan that doesn’t at least have some early action in it.”
To contact the reporter on this story: Thomas Penny in London at tpenny@bloomberg.net
Last Updated: December 9, 2009 07:51 EST
