LONDON (AFP) — Britain, which is fighting its worst recession since World War II, should return to growth at the end of this year, Chancellor Alistair Darling said on Wednesday as he delivered a crucial budget.
The economy will grow 1.25 percent in 2010 after shrinking 3.5 percent in 2009, forecast Darling, whose Labour Party led by Prime Minister Gordon Brown is flagging in the polls ahead of key elections.
Analysts had expected Darling to say that growth would not resume until 2010 amid the worst global downturn since the 1930s.
However the chancellor also warned that public borrowing would balloon to a record 175 billion pounds in 2009-10 from 90 billion pounds in 2008-09.
The government's forecasts for 2009 growth contraction and public borrowing in the current fiscal year are in line with analyst expectations.
Brown faces local elections in June and a general election that must be held by mid-2010.
Delivering his budget to parliament, Darling predicted the economy would start growing again "towards the end of the year.
"I am also confident that, as the global economy recovers to double in size over the next 20 years, Britain can, and will be, a world leader.
"This budget will help make sure we seize this opportunity."
The budget included plans aimed at helping young people back into work and providing a boost to the struggling housing and auto sectors.
In line with Germany, France and other European countries, Britain will launch a car scrappage scheme from next month worth 2,000 pounds per car, Darling said.
Ahead of the budget, official economic data showed worsening unemployment and soaring public borrowing as Britain struggles with the global financial crisis.
Labour, in power since 1997, are lagging behind the main opposition Conservative Party by up to 19 points, according to recent opinion polls.
Earlier on Wednesday, Theresa May, the Tory spokesman on employment described the budget as "a day of reckoning" for the government.
"We are now facing the longest recession since the Second World War ... and, of course, unemployment may now rise above the level which the government inherited," May told GMTV.
Official data released on Wednesday showed the unemployment rate jumping to 6.7 percent in the three months to February from 6.1 percent in the previous three months as people claiming jobless benefits rose to 2.1 million.
The figures were the highest for 12 years and were published alongside data that showed public borrowing had soared to a record 90 billion pounds in 2008-09 as the government bailed out banks and tried to tame the recession.
Slumping tax revenues have also added to the government's woes -- thanks to rising unemployment and a move late last year to slash sales tax (VAT) on goods and services to boost consumer spending.
The VAT reduction is due to expire at the end of 2009.
The public purse has meanwhile been stretched by a series of costly bailouts in which the government has rescued some of the country's biggest banks from the international credit crunch.
The International Monetary Fund on Tuesday said the financial crisis would cost the nation's banks the equivalent of 9.2 percent of gross domestic product -- or around 132 billion pounds -- by the end of the year.
In his pre-budget report last November, Darling launched a 20-billion-pound stimulus package of tax cuts, including reducing the VAT rate.
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