Wednesday, the Chancellor of Exchequer Alistair Darling announced his second budget statement.

The government now forecast a contraction of around 3.5% in 2009, the worst since the Second World War. Darling said the British economy is diverse, flexible and resilient. He expects the economy to resume growth by the end of this year and sees 1.25% growth next year.

At the same time, inflation is forecast to reach 1% at the end of this year. Retail Price Index inflation is forecast to remain negative, falling to minus 3% by September, before moving back above zero next year.

Public sector net borrowing will be a record GBP 175 billion this year or around 12.4% of GDP. As a share of GDP, borrowing will be 11.9% of GDP next year, and then it will fall to 9.1% in 2011-12.

The net debt, which includes the cost of stabilizing the banking system, as a share of GDP, will increase to 68% next year from 59% in 2009.

He announced an additional GBP 1.7 billion of funding for Job Centre Plus. He raised duties on alcohol by 2% from midnight tonight.

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