No surprises in the 2009 UK Budget| Banking Direct

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No surprises in the 2009 UK Budget

Yesterday's budget was probably the most anticipated, the most forecasted and the most feared for at least two decades in the UK.

It was obvious that UK chancellor Alistair Darling was pinning a lot of his hopes as well as his already tarnished reputation on painting a scenario where rapid economic recovery could only follow some necessary spending cuts that would allow the Treasury to regain control of public finances. In what can only be described as a budget that will continue to lead Britain into a period of long term austerity, Darling announced to parliament that he did not expect public finances to recover to pre-credit crunch levels until 2017-18. As expected, Darling revised his prediction to keep in line with the general consensus that the UK economy would contract by 3.5% in 2009 after borrowing surges to £175bn this year

He did stand firm in his conviction that the economy would begin to recover by the spring of next year.

Under a constant backdrop of dissent from the opposition parties, Chancellor Darling reeled off a series of measures covering the usual round of direct and indirect tax increases and spending cuts.

Smokers and drinkers are usually at the top of the list and 2009 was certainly no exception. Alcohol duties will increase by 2% from midnight, and tobacco duty was already up by the same figure by 18.00. These figures, expected to raise around £6billion by 2012, will mean an increase of 7p on a packet of cigarettes and 6p on a pint of beer.

Car owners and drivers also failed to escape some tax increases, Fuel duty will raise by 2p per litre in September with this increase by followed by a series of 1p a litre each year for the next four years.

January 2010 will see a return of VAT from 15% to 17.5%.

As expected, those who still find themselves in more than £150,000 a year will be asked to pay a price for their success. While this increase in income tax was expected, very few people could have seen the initiation of a top level tax rate of 50% coming, as well as a cut back on tax relief on their pension contributions.

Summing up his speech, an understandably subdued Alastair Darling, again reiterated his promise that UK finances would return to a form of balance by 2016, with net debt peaking at 79 per cent of gross domestic product in 2014.