The Chancellor had said during his Budget speech yesterday that although the UK economy will contract by 3.5% this year – far worse than he had suggested in his pre-Budget report – it would pick up as we enter 2010, with a 1.25% growth next year and a 3.5% growth from 2011 onwards.
However, economists quickly poured scorn on these wildly optimistic predictions.
The IMF estimated that there would be a 4.1% drop in output this year, followed by a further 0.4% fall next year.
Chief economic adviser to the Ernst & Young Item Club, Peter Spencer, said: “It’s just wishful thinking. It's impossible to find a period when that sort of recovery has actually come through…if you believe that, you'll believe anything.”
It would seem that in order to satisfy such bullish projections, not only would a total consumer recovery have to take place, it would have to be another boom. Conservative leader David Cameron commented: “This wouldn’t be a U-shaped recovery; this would be a trampoline recovery.”
Mr Darling outlined plans to borrow a record £175 billion next year and a total of £703 billion over five years, making public debt rocket to £1.4 trillion – 79% of gross domestic product.
Many were shocked by the move to hit those earning over £150,000 a year with a 50% top rate tax as of next April. Economists have anticipated another “brain drain” on Britain as high-earners and investors vote with their feet and establish their businesses in a country with a more attractive tax rate.
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