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UK Budget Lowers Deficit Forecasts

The British government cut its deficit forecasts and announced a 2.5 billion pound ($3.7 billion) one-off growth package for the economy as the centerpiece of its annual budget on Wednesday - its last before an anticipated tough national election.

Treasury chief Alistair Darling fulfilled his warnings that there would be few giveaways in the spending plan as the government seeks to cut a record budget deficit, but did offer some voter-friendly measures such as a reduction in taxes for first-time home buyers.

"This will be a budget to secure the recovery, tackle borrowing and invest in our industrial future," Darling told lawmakers in the House of Commons. "It will continue targeted support for business and families where and when it is needed."

Lagging behind the main opposition Conservative Party in the polls for an election that is expected on May 6, the Labour Party government is trying to spin its hands-tied position into an example of steady stewardship in times of austerity.

Opposition Conservative Party leader David Cameron called the budget a failure.

"Like every Labour government before them, they have run out of money and have left it to the next Conservative government to clean up the mess," Cameron said.

Darling stressed that the government's actions during and after the financial crisis had meant that Britain's 19-month long recession, which ended in the final quarter of last year, did not slide into a depression.

The government maintained its forecast for economic growth this year of 1-1.5 per cent, but lowered next year's forecast slightly to 3-3.5 per cent from 3.5 per cent.

"The recovery is still in its infancy and there are still tough choices ahead," Darling said, adding that financial markets are "still febrile" and that recovery "is not preordained."

The budget plans shows current expenditure rising from 604.6 billion pounds ($901.8 billion) in the current financial year, which ends on March 31, to 644 billion pounds ($960.6 billion) in the next year and 662 billion pounds in 2011-12.

Labour has resisted calls to cut stimulus measures faster, by reducing spending and hiking taxes, to help cut the budget deficit, arguing that could send the economy back into a dreaded double-dip recession.

"The big argument in British politics is this: They say 'Don't do anything before the election, let's just sit tight and keep our fingers crossed," Cameron said.

"We say we need urgent action to get our economy moving and quickly. We need a credible plan to deal with Britain's record debts starting now and we need to show the world we are back and open for business."

Darling did lower government's forecasts for the deficit out to 2014/15, citing stronger tax receipts from the recent tax on bankers' bonuses and strong sales tax contributions.

Borrowing would reach 167 billion pounds ($249 billion) this year, he said, down from the previously forecast record 178 billion pounds.

A series of reductions in the next few years would leave the deficit 100 billion pounds lower in 2014/15 than previously thought, he added.

The credit rating agencies have issued muted warnings over Britain's fiscal position and the status of the country's "triple-A' sovereign debt rating, which allows the country to borrow relatively cheaply.

The Conservatives argue that fiscal tightening won't endanger economic recovery if it is based on lower public spending, rather than higher taxation.

Nick Clegg, leader of the Liberal Democrats, the third-largest party in Parliament, accused Darling of being "in denial" about the scale of spending cuts required.

Clegg said the government and the Conservatives lacked the "courage to come up with the details of the cuts we will need in the years ahead to tackle Britain's deficit."

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