UK's Chancellor of Exchequer Alistair Darling is expected to announce a reduction of GBP 15 billion in Whitehall spending in the budget statement on April 22, British media reports said Monday.
In his second budget, Darling is also expected to downwardly revise the GDP forecast for the British economy. The Treasury might project an annual contraction in the range of 3% to 3.5%, making it the worst recession since 1945, the BBC reported.
Earlier in the day, the Confederation of British Industry forecast a slow and fragile recovery in the UK with growth resuming only in the spring of 2010. The industry lobby said the recession deepened more than expected in the first quarter of this year, but it is forecast to moderate in the second half of the year. The CBI revised down its GDP forecast for 2009 to a 3.9% contraction compared to an earlier estimate of a 3.3% GDP decline.
In the meantime, the Ernst & Young ITEM Club said the British output would stabilize by the end of this year, with a modest recovery beginning next spring. The think tank expects the economy to shrink 3.5% in 2009 and 0.1% next year.
The Treasury has already announced GBP 5 billion worth savings in the financial year 2010/2011. According to the BBC, Darling is set to announce further GBP 10 billion savings for 2011/12.
The reports said the budget may consist of a car scrappage scheme which provides an incentive of GBP 2000 to purchase a new car. But this plan has not been finalized yet.
According to the Times newspaper, Darling's second budget would include GBP 2 billion to help the jobless, a support to North Sea oil companies through tax incentives and measures to assist housing market by offering to underwrite GBP 50 billion worth of new mortgage-backed assets.
Meanwhile, some of the key points in the budget submission of the British Chambers of Commerce include a form of government guarantee scheme for credit insurance and short-term fiscal measures to help with cash flow such as a freeze in the national minimum wage, the reintroduction of empty property rate relief and a reduction in the rate of small companies' corporation tax.
The BCC submission also included creating enterprise zones, where businesses can avail a number of tax exemption and enjoy simplified planning regime; and increase in targeted and shovel ready infrastructure projects totaling GBP 20 billion in the coming year.
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