Page last updated at 15:05 GMT, Wednesday, 24 March 2010

Budget 2010: Government borrowing revised down

Alistair Darling

Darling on reducing UK debt

The government will need to borrow less than expected this year to plug the gap in the UK's finances, Alistair Darling has announced in the Budget.

Net borrowing for the financial year will total £167bn, he said, down from the £178bn he previously forecast in last year's pre-Budget report.

The chancellor said he would stick to the plan to cut borrowing by half over the next four years.

But Mr Darling also downgraded his growth forecast for the UK economy.

Although lower than first feared, borrowing this year is still expected to be at a record high - equivalent to 11.8% of GDP.

budget deficit

The chancellor has also lowered his borrowing expectations for the next four years.

By 2014, the chancellor now expects borrowing to be reduced to 5.2% of GDP - lower than the 5.7% previously targeted.

That keeps the government on track to meet its own pledge to cut the budget deficit by half, in percentage terms, over the next four years.

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That will have a small impact on the total amount of government debt, which is now forecast to rise to 75% of GDP by 2015, instead of the 78% previously forecast.

The chancellor said tax receipts in December, January and February had been higher than expected, with corporation tax and income tax bringing in more money.

Spending, meanwhile, had remained broadly in line with expectations.

But despite the positive news on the state of the public finances, Mr Darling was slightly less optimistic about the outlook for economic growth.

GDP forecasts

The chancellor now expects GDP to grow by 3% in 2011, rather than the 3.5% forecast in the pre-Budget report.

That earlier forecast was regarded as too optimistic by many independent forecasters, with the new forecast now in line with that of the Bank of England.

Mr Darling remained upbeat about other areas of the economy. He said that government action had helped the recent falls in unemployment.

Jobless rates were far below the peaks seen in the previous recessions of the 1980s and 1990s, he said.

Spending plans

Little detail was given on how future spending plans would help cut the budget deficit.

Despite stressing the need to cut the budget deficit, the chancellor repeated his view that cutting spending now would "pull the rug from under the recovery", adding that the government still planned to increase spending next year by 2.2%.

The chancellor gave no indication of spending plans beyond then, but said the next spending settlement would be "the toughest for decades".

Cuts and savings already identified, he said, would cut £20bn from spending from 2011.

That includes cutting senior civil servants' pay and relocating more civil servants out of London.

He said that relocating 1,000 Ministry of Justice posts out of London would save £41m alone.



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