Budget 2009

Alastair Darling today outlined his budget to get Britain out of recession quickly, stating “you can grow your way out of a recession; you can’t cut your way out of it.” The headline grabbing measure of this budget was an increase of the tax threshold for Britain’s top earners to 50%, to be introduced next year, forcing the Tories to adopt or scrap what will probably be a popular measure.

In a sombre statement Darling declared that the economy is forecast to shrink 3.5% in 2009 with growth expected to pick up in 2010, expanding by 1.25%. Public borrowing is set to increase to £175bn this year and will rise by £173bn, £140bn, £118bn and £97bn in years after

A small life line was thrown to struggling businesses - they will be able to reclaim taxes on profits paid in the last three years until November 2010. The Chancellor also announced a new £750m strategic investment fund to help emerging technologies and regionally important sectors. The budget also included a financial boost to low carbon industries, and a range of measures aimed at getting the unemployed back into work.

Reacting to the budget David Cameron stated, "Today everyone can see what an utter mess this Labour government and this Labour Prime Minister have made of the British economy - the fastest rise in unemployment in our history the worst recessions since world war two and the worst peace time public finances ever known,"

Nick Clegg described the Budget as “a mishmash of recycled announcements from a government skilled in raising false hopes, but incapable of delivering practical help”. He went onto criticise the planned income tax increase for high-earners as "tokenistic" and unlikely to raise significant sums of money.

The effect of today’s announcements on the economy remains to be seen, that said the FTSE fell dramatically during the chancellor’s statement only to rally by over 30 points by the finish. Without doubt the health of the of our public finances and severity of government debt is causing concern in the city, especially as today’s budget detailed a required increase of £70 billion in government bond sales.

Richard Lambert, CBI Director-General, said: The key question for this Budget was whether it set out a credible and rigorous path for restoring the public finances to health. The CBI’s preliminary judgement must be that it does not.

Key points:

· Chancellor confirmed his view that he expects economic recovery to start this year.

· However, he expects that the economy will shrink by 3.5%, year on year, during 2009. Growth in 2010 is forecast at 1.25%.

· Inflation target remains unchanged at 2%; forecast is that it will be 1% by the year end.

· Statutory Redundancy Pay up by £30 to £380 per week.

· Stamp Duty “holiday” extended until end of year for all houses costing up to £175,000

· New trade credit insurance scheme will “top up” private sector provision. Government will offer to match private sector trade credit insurance provision, for a temporary period, if insurers reduce cover to any UK business;

· A £600 million funding package to build more homes through unlocking sites currently sitting dormant

· The 5% reduced rate of VAT for children’s car seats will be extended to include bases for such seats, with effect from 1 July 2009.

· It has been confirmed that the “temporary” VAT reduction measure will end on 1 January 2010.

· Alcohol and tobacco duties up by 2% today; fuel duty to rise by 2p per litre from September.

· New top rate of tax will be 50%, not 45% as previously announced, from 2010.

Budget 2009 – Building Britain’s Future