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Budget to reveal depth of gloom Budget to reveal depth of gloom
(30 minutes later)
Chancellor Alistair Darling will be forced to set out the full extent of Britain's economic woes in his Budget.Chancellor Alistair Darling will be forced to set out the full extent of Britain's economic woes in his Budget.
He is expected to unveil soaring public borrowing and details of the worst peacetime recession. He is expected to unveil soaring public borrowing and confirm the country is in its worst peacetime recession.
Tax rises and spending cuts from 2011 are likely as Mr Darling sets out his plans to restore public finances.Tax rises and spending cuts from 2011 are likely as Mr Darling sets out his plans to restore public finances.
Meanwhile, the International Monetary Fund (IMF) has admitted it made a mistake when it claimed the UK faced a £200bn bill for bailing out the banks.Meanwhile, the International Monetary Fund (IMF) has admitted it made a mistake when it claimed the UK faced a £200bn bill for bailing out the banks.
A Treasury spokesman said the figure had been issued in the IMF's Global Financial Stability Report in error.A Treasury spokesman said the figure had been issued in the IMF's Global Financial Stability Report in error.
BUDGET COVERAGE Live video and text coverage of the Budget - with full analysis and reaction as it happens - begins on the BBC News website at 1130GMT, with Mr Darling due to begin his speech in the Commons at 1230 GMT.
"The Budget will make a prudent provision for potential losses from banking interventions in line with our cautious approach to forecasting the public finances," the spokesman said."The Budget will make a prudent provision for potential losses from banking interventions in line with our cautious approach to forecasting the public finances," the spokesman said.
Mr Darling will reveal his own estimate of the bail-out cost - reported to be more like £60bn - when he delivers the Budget.Mr Darling will reveal his own estimate of the bail-out cost - reported to be more like £60bn - when he delivers the Budget.
Borrowing forecastsBorrowing forecasts
Weeks ahead of his second Budget as chancellor, Mr Darling had already acknowledged that the recession would be worse than he had predicted.Weeks ahead of his second Budget as chancellor, Mr Darling had already acknowledged that the recession would be worse than he had predicted.
In his new economic forecast on Wednesday he is expected to revise his predictions of last November that the economy will contract by between 0.75% and 1.25% of Gross Domestic Product in 2009.In his new economic forecast on Wednesday he is expected to revise his predictions of last November that the economy will contract by between 0.75% and 1.25% of Gross Domestic Product in 2009.
If, as expected, he now predicts a slowdown of as much as 3.5% of GDP - it would make this the worst recession since 1945.If, as expected, he now predicts a slowdown of as much as 3.5% of GDP - it would make this the worst recession since 1945.
He is also expected to revise his public sector borrowing forecasts, as tax revenues fall.He is also expected to revise his public sector borrowing forecasts, as tax revenues fall.
EXPECTED MEASURES Growth forecast revised downBorrowing increased£15bn 'efficiency savings'Clawing back tax relief on top earners' pension £2bn help for young unemployed£1bn to boost housing marketCar scrapping scheme What could be in the 2009 Budget Meltdown losses of '$4 trillion' Inflation measure turns negativeEXPECTED MEASURES Growth forecast revised downBorrowing increased£15bn 'efficiency savings'Clawing back tax relief on top earners' pension £2bn help for young unemployed£1bn to boost housing marketCar scrapping scheme What could be in the 2009 Budget Meltdown losses of '$4 trillion' Inflation measure turns negative
Experts believe his £118bn prediction for borrowing for 2009-10 could be increased to as much as £160bn.Experts believe his £118bn prediction for borrowing for 2009-10 could be increased to as much as £160bn.
Mr Darling is expected to explain how he intends to get the public finances back on track - possibly with future tax increases and spending cuts that would come in after the next general election.Mr Darling is expected to explain how he intends to get the public finances back on track - possibly with future tax increases and spending cuts that would come in after the next general election.
There will be a new 45% top rate of income tax from April 2011 on earnings over £150,000 - which Mr Darling hopes will raise £1.6bn a year, although the Institute for Fiscal Studies has predicted it will only raise about £550m. BBC Political Editor Nick Robinson said: "Today he has to say a little bit about a future squeeze on spending and future tax rises.
"But...he will be very political. He is a Labour chancellor and what he will say is he wants the wealthy to take the burden."
Mr Darling has already announced a new 45% top rate of income tax from April 2011 on earnings over £150,000 - which he hopes will raise £1.6bn a year, although the Institute for Fiscal Studies has predicted it will only raise about £550m.
'Few easy wins''Few easy wins'
The VAT rate, temporarily lowered to 15% last December, is due to go back up to 17.5% at the end of the year and there has been speculation that it may go up further, to 18.5%.The VAT rate, temporarily lowered to 15% last December, is due to go back up to 17.5% at the end of the year and there has been speculation that it may go up further, to 18.5%.
The Treasury also says it could make £15bn spending cuts through "efficiency savings" from 2010 - although a report from a panel of independent advisers to the Treasury warned the government there would be "few easy wins" and the projected savings were not certain.The Treasury also says it could make £15bn spending cuts through "efficiency savings" from 2010 - although a report from a panel of independent advisers to the Treasury warned the government there would be "few easy wins" and the projected savings were not certain.
FROM THE TODAY PROGRAMME More from Today programmeFROM THE TODAY PROGRAMME More from Today programme
The full benefits of "sustained action" would not be seen until 2013-14, they said.The full benefits of "sustained action" would not be seen until 2013-14, they said.
The proposal has annoyed the Public and Commercial Services Union, whose general secretary Mark Serwotka said the government should concentrate on getting tax from the "super rich" and big corporations.The proposal has annoyed the Public and Commercial Services Union, whose general secretary Mark Serwotka said the government should concentrate on getting tax from the "super rich" and big corporations.
"The government calls these efficiency savings but let's be clear, they are real cuts that will affect public services, people's jobs, livelihoods and pensions," he said."The government calls these efficiency savings but let's be clear, they are real cuts that will affect public services, people's jobs, livelihoods and pensions," he said.
Mr Darling has already indicated there will be help for employers to save jobs and there have been suggestions there will be a car scrapping scheme, which could see people get £2,000 to trade in their old cars for new.Mr Darling has already indicated there will be help for employers to save jobs and there have been suggestions there will be a car scrapping scheme, which could see people get £2,000 to trade in their old cars for new.
He could also claw back tax relief on the pensions of top earners, although this is only likely to affect those on £100,000 a year or more.He could also claw back tax relief on the pensions of top earners, although this is only likely to affect those on £100,000 a year or more.
Housing packageHousing package
Gordon Brown has said the Budget will plot a "green" route to economic recovery. Mr Darling is expected to announce the world's first legally-binding budgets for greenhouse gases in an effort to get the UK to cut emissions by between 34% and 42% by 2022.Gordon Brown has said the Budget will plot a "green" route to economic recovery. Mr Darling is expected to announce the world's first legally-binding budgets for greenhouse gases in an effort to get the UK to cut emissions by between 34% and 42% by 2022.
A £1bn package aimed at boosting house sales and house building is expected to include a three-month extension on the stamp duty "holiday" on homes costing below £175,000, which will remain in place until the end of the year.A £1bn package aimed at boosting house sales and house building is expected to include a three-month extension on the stamp duty "holiday" on homes costing below £175,000, which will remain in place until the end of the year.
Liberal Democrat Treasury spokesman Vince Cable said people needed "a very clear statement - without spin - about exactly what the situation is in the economy".Liberal Democrat Treasury spokesman Vince Cable said people needed "a very clear statement - without spin - about exactly what the situation is in the economy".
He told BBC Radio 4's Today programme he was concerned about when the economy would get back into balance, in light of falling tax revenues from the financial and housing sectors.He told BBC Radio 4's Today programme he was concerned about when the economy would get back into balance, in light of falling tax revenues from the financial and housing sectors.
The challenge to politicians of all parties was to show "how public expenditure is going to be tightly disciplined over the next Parliament and beyond", he added.The challenge to politicians of all parties was to show "how public expenditure is going to be tightly disciplined over the next Parliament and beyond", he added.
Shadow chancellor George Osborne said the estimates of the cost of the bank bail-outs showed the "potentially massive cost of Gordon Brown's utter failure to regulate the banking system".Shadow chancellor George Osborne said the estimates of the cost of the bank bail-outs showed the "potentially massive cost of Gordon Brown's utter failure to regulate the banking system".
The Tories say the Budget will be a "day of reckoning" which will "lay bare" Labour's economic failings.The Tories say the Budget will be a "day of reckoning" which will "lay bare" Labour's economic failings.
Mr Osborne has urged the chancellor to focus on how to reduce government debt rather than "short-term political pressures" ahead of a likely election in 2010.Mr Osborne has urged the chancellor to focus on how to reduce government debt rather than "short-term political pressures" ahead of a likely election in 2010.