CHANCELLOR Alistair Darling’s Pre-Budget report today looks certain to reveal the UK faces slumping growth and spiralling borrowing.
Mr Darling is expected to unveil a tax and spending windfall in an attempt to help the country stave off the worst effects of the downturn, but Treasury predictions are expected to lay out the grim reality of the onrushing recession.
In March’s Budget, Mr Darling was forecasting growth of between 1.75% and 2.25% this year, recovering to between 2.25% and 2.75% in 2009.
But the steady deterioration in the economy since then has dampened this rosy picture as unemployment soars to an 11-year high above 1.8m, and companies lay off tens of thousands of people.
The UK economy was stagnant in the second quarter of the year – ending a proud Labour boast of 63 consecutive quarters of growth – before a shocking 0.5% decline between July and September drew the first public warnings of recession from Prime Minister Gordon Brown.
Roger Bootle, of Capital Economics, said Mr Darling would have to “bite the bullet” and was likely to mark down 2008 forecasts to between 0.75% and 1% in 2008, and between 0.5% and 0% next year.
Mr Bootle, who himself predicts a 1.5% decline in output next year, added: “Even if forecasting an outright fall in GDP proves to be one step too far for the Chancellor, he will have to concede that the economy is at least unlikely to grow next year.”
Professional advisers in Liverpool are urging the Chancellor to provide a much-needed boost for small businesses and entrepreneurs in his Pre-Budget Report.
Stephen Hunter, a tax partner at accountants KPMG in the city, said: “While on the tax front he has limited room for manoeuvre as public finances are clearly stretched, I believe tax changes that help local entrepreneurs maintain their levels of enterprise and investment will be critical to the economic success of this region.
“This is especially important when businesses are finding it difficult to secure funding as easily as in previous years.
“In relation to property, I’d like the Chancellor to remove the requirement for business rates to be paid on empty properties.” Jane Jackson, a tax partner at PKF in Liverpool, wants to see a boost given to the housing market by temporarily raising the Stamp Duty Land Tax (SDLT) nil rate band on residential properties to £1m.
“The SDLT statistics for 2006-07 and 2007-08 show the Government received £6.5bn and £6.6bn respectively on residential transactions.
“The figures for 2008-09 are likely to be much lower, so introducing a temporary extension of the nil rate band will not cost the Chancellor a huge amount more than doing nothing.”
tonymcdonough
