Thursday March 13, 09:36 AM
UK BUDGET Darling maiden budget dull and over-optimistic - press reports
LONDON (Thomson Financial) - The UK press gave an unenthusiastic welcome to Chancellor of the Exchequer Alistair Darling's maiden Budget, complaining it was incredibly dull, but conceding he had little option to do much else.
However they also pointed to warnings from economists that the Treasury's forecasts are pinned on the expectation the credit crunch will be short-lived, which could well turn out not to be the case.
The Daily Telegraph painted the Chancellor as being unduly optimistic about the UK economy's prospects in the coming year. It (Frankfurt: A0MLX5 - news) noted that while he claimed Britain is well placed to 'weather economic storms', the detail in the Treasury's economic forecasts paint a much more gloomy picture.
The cut in the government's 2008 GDP growth forecast to 1.75-2.25 pct signals the economy could be facing its weakest year of expansion since 1992.
Within the Budget documentation, the Treasury is also forecasting falls in stamp duty on house purchases, and inheritance and capital gains tax revenues since 2001, as a result of 'sluggish or flat house price growth'. Meanwhile the government is expecting to receive less cash from City bonuses as income tax receipts rise at a lower pace than wage inflation.
The Telegraph also cites figures from the drinks industry, where sources said that the rises in alcohol duty, which Darling is banking on to shore up the public finances, could backfire.
Trade organisations claimed consumers would shy away from the higher prices -- a pint of beer is set to rise by 4 pence, a bottle of spirits by 55 p -- causing sales to fall.
The Daily Mail said Darling had 'rose tinted spectacles', as he was gambling on Britain weathering the global economic slowdown.
The Financial Times said Darling was playing for time by delivering a modest budget at a time when the economy appeared to be at the mercy of events in the financial markets.
However it noted that the Chancellor's calculations for government borrowing and the forecast that it can meet the fiscal rules rely heavily on the judgement that the global credit crunch will be relatively short-lived.
Excluding the impact of Northern Rock (LSE: GB0001452795.L - news) , the Treasury is forecasting that public sector net debt will rise to 39.8 pct of GDP by 2010-11, only just below its self-imposed ceiling of 40 pct.
The paper also noted that Darling had managed to avoid announcing any new measures that would attract more hostility from business groups, whose relationship with the government has become increasingly fraught since a series of surprise announcements on capital gains and non-domicile taxes in October's Pre-Budget Report.
The Guardian said the Budget was very much one for the future, covering key issues on the environment and child poverty, but refraining from introducing any immediate major changes.
Supermarkets have been threatened with a tax on carrier bags but not at the earliest until next year, while the introduction of new carbon emission budgets will not happen until the next Budget.
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