What’s going on in the economy? 2009 Budget

April 22nd, 2009

I don’t know about you but I find it really hard to understand exactly what is going on in our economy.

Today we are reading reports that mortgage lending in March rose by 16 per cent and that we are finally seeing movement in the housing market. Lending in March 2009 was still 52 per cent lower than in March 2008 but at least it is moving in the right direction. The numbers of homes changing hands in March also jumped by 40 per cent and property website Rightmove confirmed that they have seen house prices rise in the past three months.

So on the one hand things are starting to show signs of improving. Then along comes Alastair Darling with his 2009 Budget. He announced today that
the UK will have to borrow a record £175 billion with our economy this year expected to be the worst since the second world war.

Key points from the budget include:

* Alcohol taxes up 2% from midnight
* Tax on tobacco up 2% from 6pm
* Fuel duty to rise by 2p per litre from September
* Introduction of a car scrappage scheme
* A rise in income tax for those earning over £150,000
* A reduction in tax relief on pensions for people on more than £150,000 a year

And the outlook for the Economy
* Forecast to shrink by 3.5% in 2009
* Growth expected to pick up in 2010, expanding to 1.25%
* Economy to grow by 3.5% annually from 2011
* Public borrowing to increase to £175 billion
* Consumer price inflation to fall to 1% by the end of the year.
* Retail price index to go to -3% by September.

The International Monetary Fund thinks that Alastair Darling is being rather optomistic with his growth expectations in 2010. They predict that the economy will shrink by 4.1% this year and continue to contract by 0.4% in 2010.

Time will tell but at the moment I wouldn’t certainly err on the side of caution.

Entry Filed under: Finances, politics, house and home