Budget 2009: Darling forced to admit economy worse than ever

Today’s Budget speech will reveal that the country is in deeper debt that ever.

The Chancellor will be forced to issue more than £200bn in government bonds in today’s Budget (well above market expectations) and will also have to admit that the country’s finances have sunk deeper into the red.

Public sector borrowing is much worse than forecast in November’s pre-budget report. New figures from the Office of National Statistics show that borrowing reached £90bn this year, £12bn more than estimated in November, and it is expected to reach some £160bn in 2009-2010, climbing to as much as £175bn the year after.

The FT predicts that this record peacetime borrowing will overshadow Darling’s aim of presenting what he has called a ‘Budget for jobs’ and investing in future growth.

Public spending is expected to be scaled back, with around £10bn worth of cuts in addition to those already announced.

Analysts predict that Darling will also introduce future tax increases that would be implemented after the next general election to try and bridge the deficit.

A new 45% top rate of income tax on earnings over £150,000 has already been introduced and will take effect from April 2011. Darling hopes will raise £1.6bn a year, although the Institute for Fiscal Studies has predicted it will only raise about £550m.