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March 24, 2010    

Alistair Darling set to deliver Budget today

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by Kay Murchie

The Pre-Election Budget will be delivered today by Chancellor Alistair Darling but he has repeatedly said there will be no “giveaways” ahead of the general election.

What we can expect to see, though, are more details of how the Government expects to trim the budget deficit.

Mr Darling has previously pledged to halve the budget deficit in percentage terms over the next four years and while he is facing pressure to cut the deficit more quickly, he argues that the economic recovery is still too fragile warned that cutting the deficit too quickly could pose a threat to the recovery.

The Treasury is heavily depending on economic growth to reduce the deficit, but its forecasts for economic growth of at least 3.25% in 2011 and the three following years have been described by many as too optimistic.

Last week, the European Commission said the Government’s plans for reducing the budget deficit are not ambitious enough.

In response, Prime Minister Gordon Brown said: “We are going to cut our deficit by half over the next four years. But what we will not do is put the recovery at risk.”

In the meantime, the Chancellor has said that a rise in VAT was “not on the table”, but alcohol duty is expected to rise, while other tax rises and new charges, such as the 50% high-earners’ rate, have also been highlighted.

Furthermore, a change to stamp duty is on the cards. Speculation is mounting that Mr Darling will announce that stamp duty will be abolished on house purchases up to £250,000 for first-time buyers.

There are other ‘sweeteners’ expected in today’s budget - for low-income earners or jobseekers to strengthen Labour’s position in the forthcoming election.

The Government has already received a boost in the last week or so after the Office for National Statistics (ONS) revealed that UK unemployment fell slightly in the three months to January to 2.45 million.

The number of Britons claiming jobseeker’s allowance (JSA) also fell by 32,300 in February to 1.59 million - the sharpest fall since November 1997, just after Labour came to power.

Furthermore, official figures yesterday revealed a bigger-than-expected drop in the UK inflation rate.

The ONS said Consumer Price Inflation (CPI) slowed to 3% in February - slightly more than the 3.1% expected by analysts.

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