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Comment - UK Budget 2009

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Without wishing to be labelled as doomsaying hack, there really doesn't look to be much positive news emerging from Chancellor Alistair Darling's UK Budget Speech.

On a drinks industry level, Darling told Parliament today (22 April) that duty tax on alcoholic drinks will rise by 2% above inflation by midnight tonight, despite one of the most co-ordinated lobbying efforts by drinks trade bodies in recent memory.

Unsurprisingly, drinks makers have been queuing up to lambast Darling this afternoon. Thousands of jobs will be lost and lower sales means that the Treasury will not see the benefit that it expects, they say.

The British Beer & Pub Association accused Darling of "signing the death warrant" of the pub sector. The Scotch Whisky Association pointed out that, seeing as Darling also predicted that the retail price index would be -3% in September this year, the "real terms" tax rise on drink is 5%.

On a macroeconomic level, things look bleak.

The Government now expects UK gross domestic product to decline by 3.5% in 2009. If that happens, it will be the UK's biggest fall on record.

Somewhat more optimistically, albeit to deafening scepticism around Parliament, Darling said that he expects GDP growth to be 1.25% in 2010 and 3.5% in 2011. The International Monetary Fund, however, said today that it expects UK GDP to shrink by a further 0.4% in 2010.

Just as much of a concern is the scale of UK debt, which is set to reach 59% of GDP this year and is expected to rise to 79% of GDP by 2013/14. This is pretty seismic stuff and some analysts said this afternoon that it could threaten the UK's credit rating, which, in the vicious circle of life, could increase debt further by making it more expensive to borrow.

This is not to say that the Government has necessarily made the wrong decision to "spend its way out of recession". The Conservative Party, the main opposition, is vehemently against this strategy - but then, it also knows that if all goes as predicted in next year's General Election, it will be the one saddled with managing the debt.

To make matters worse, the International Monetary Fund has today predicted that 2009 will bring the first global recession since the end of World War Two in 1945.

At least the sun is shining in the UK today.


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