London - A record "black hole" in public finances and a sharper than expected contraction in the economy emerged Wednesday as the two key factors marking the scale and the cost of the economic recession in Britain. In its 2009/2010 budget, presented to parliament Wednesday, the government conceded that it is deep in the red with public sector borrowing expected to hit a record 175 billion pounds (255 billion dollars) this year.
The dizzying scale of the borrowing figures was flanked by a sharp downward revision in growth forecasts, with negative growth of 3.5 per cent now predicted for this year - compared with growth forecasts of 2.5 per cent just a year ago.
Presenting the budget, the Chancellor of the Exchequer, Alistair Darling, acknowledged that Britain was facing the "deepest recession since the Second World War."
Public sector net borrowing will amount to 12.4 per cent of gross domestic product (GDP) this year, and fall slightly to 173 billion pounds in 2010, said Darling.
However, he expected that the current state deficit would be halved within four years and that the British economy would "grow again by the end of this year."
Darling's prediction that the British economy could return to a growth rate of 3.5 per cent by 2011 was dismissed as being too optimistic by analysts.
"We suspect 3.5 per cent is far too optimistic for growth in 2011, especially given the very substantial fiscal tightening that will be required," said Howard Archer, a City economist.
Darling announced a range of measures aimed at alleviating the impact of the recession, stimulating the economy and increasing tax revenue.
They included a limited cash incentive scheme for drivers willing to scrap older cars in return for buying new models, "efficiency cuts" in government services, extra help for the young unemployed and the introduction of a 50-per-cent tax rate for high earners.
The gloomy facts delivered in the budget coincided with the publication of unemployment figures Wednesday which showed that unemployment in Britain rose to 2.1 million between December and February.
Britain became the first major country in Europe to launch massive bank bailout schemes and a series of fiscal stimulus measures to beat the credit crunch and the recession last autumn.
The key question now being asked by analysts is how, and whether, the government will succeed in getting public spending under control, given the expected continuing rise in unemployment and fall in tax revenues.
Seizing on the debt burden, Conservative opposition leader David Cameron said the budget showed that the British economy was in an "utter mess" following a "decade of debt" presided over by a Labour government.
