Darling Cuts U.K. Deficit Forecasts, 2011 Economic Outlook

By Gonzalo Vina

March 24 (Bloomberg) -- Chancellor of the Exchequer Alistair Darling said Britain’s budget deficit will be smaller than he previously forecast over the next four years. Darling today unveiled plans to cut the shortfall to 89 billion pounds ($132 billion) by April 2014 from 167 billion pounds this fiscal year. He said borrowing will fall to 163 billion pounds next year before declining to 74 billion pounds in 2014-15. The chancellor said he’ll stick to current spending plans for the fiscal year that starts next month, with a 2.2 percent increase in real terms. “This will mean debt is 100 billion pounds lower by 2013- 14 than was expected at last year’s budget,” Darling told Parliament in his budget statement in London.

The budget was Darling’s last chance to reassure voters and investors that the government has taken the right steps to
tackle the worst recession in 60 years and limit the fallout from the global banking crisis. Darling’s resistance to faster spending cuts has helped narrow the Conservatives’ lead in opinion polls before the election that Labour Party briefing
documents suggest will be held on May 6. The chancellor said he expects growth to be between 3 percent and 3.5 percent in 2011, lower than a December forecast of as much as 3.75 percent. That’s above the median in a survey of economists compiled by the Treasury of 2.1 percent. Darling said the economy would expand by 1 percent to 1.5 percent thisbyear, in line with his previous forecast. “The record shows the right calls were made,” Darling said. “Recession has not turned into depression although the recovery is still in its infancy.” As a share of the economy, borrowing is forecast at 11.8 percent of gross domestic product this fiscal year. It will then fall to 11.1 percent next year and drop to 4.0 percent in 2014- 15.