Recession fears ahead of budget
Alistair Darling may have to slash his economic growth forecasts when he delivers his first budget on Wednesday, it has been claimed.
Analysts said the chancellor will have to downgrade his GDP predictions for this year, having already cut his forecast to 2%-2.5% in October, compared to between 2.5% and 3% previously.
The news comes as Liberal Democrat Treasury spokesman Vince Cable warned that the budget must prepare for a recession.
"There are very good reasons for believing there is a high risk of recession," Cable said.
"It's not probable. It is certainly possible. We therefore need to consider how the British economy would cope," he added.
With a potential reduction of growth forecasts putting a further strain on public finances, forecasts are for an introduction of "green taxes" and big duty rises in alcohol levies.
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Duty rises are almost certain for strong alcoholic drinks following the government's widely publicised plan to tackle binge-drinking and under-age alcohol abuse.
The chancellor is also expected to announce a 2p-a-litre rise in fuel duty and a "showroom tax" on gas-guzzling 4x4 cars, though there are reports that the introduction of "green taxes" on motorists will be delayed to reduce the risk of Britain sliding into a recession.
The proposal to impose a £30,000 charge for residency in the UK could also be modified following widespread criticism from some the UK's most influential business lobby groups.
Richard Lambert, the Director-General of the CBI, followed up his recent attacks on the proposed tax on non-domiciles with a claim that the UK could be about to make the same mistake as the US when it introduced the Sarbanes-Oxley legislation after Enron's collapse.
The Association of British Insurers (ABI), meanwhile, has written to the Chancellor claiming that changes to CGT and frequent changes to the savings regime had "damaged the Treasury's credibility".
The ABI also reiterated its call for a compromise agreement for investment bonds in the light of changes to CGT measures. From April, investors in unit trusts and open-ended investment companies will be liable to 18% CGT, while profits on investment bonds get taxed at 40%.
