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Business and financial adviser Grant Thornton says that he raised revenue through green taxes while offering little in concessions to UK business or individuals.

Tax burden to increase 

Given the current state of the economy and public finances, Grant Thornton's chief economist, Stephen Gifford, believes Darling could do little else with his first budget but hope to stem the tide of a slowing economy and try to shore up the public finances with tax rises on such things as polluting behaviour, Vehicle Excise Duty and alcohol.

Overall, the tax burden is predicted to increase by £0.8 billion in 2009/10 and by £1.9 billion in 2010/11.

"In essence, Darling's budget was the placating dummy offered to an economy on the verge of a tantrum," says Gifford.

The Budget sets out some remarkable changes in the expectations for the public finances. Public borrowing over the 2008/09 to 2011/12 period is expected to be some £20 billion higher than in December 2007.

The Sustainable Debt Rule, which states that the aggregate stock of public debt must not exceed 40 per cent of GDP, is forecast to grow to 39.8 per cent by 2010/11, only a whisker away from the target. 

Gifford notes, "These changes in the public finances since October 2007 are remarkable and illustrate the worrying effects that the credit crunch is now having, not just on the financial sector but on the whole of the UK economy."

Tweaked existing green initiatives 

Aside from delaying the 2p rise in fuel duty, scheduled for April, until October this year, and moves to fight child poverty, Gifford says there was little to cheer about for both business and individuals in the budget, with Darling choosing to "hold the ship steady" rather than create any further wholesale changes to tax policy.

"It seemed Darling was more interested in espousing the virtues of the UK's resilience to the credit crunch compared with the weaker performances of its peers, than offering an olive branch to the taxpayer," says Gifford.

"As for the green budget, the truth was that he tweaked existing green initiatives but made no real bold moves," he adds.

Gifford explains that the UK is living amidst a climate of global economic uncertainty. He says there is doubt about what the full effect of the credit crunch will be, doubt about the effects and costs of climate change and insecurity in the financial and property markets.

“It would appear Darling has decided that prudence and stability is key and has largely maintained the status quo," Gifford adds.

Financial credit crisis 

He says the UK has enjoyed solid growth over the last 15 years with 2007 being particularly successful for the country when GDP rose by 3.1 per cent, well in excess of the long term trend.

The UK had a fast growing financial services sector, a healthy housing market and a confident consumer base, which have all been major contributors to this success.

“That is now, however, a fleeting memory. The Chancellor is now trying to appear to do all he can to prevent the financial credit crisis turning into a serious economic slowdown without actually changing much" Gifford says.

He warns that Darling is hampered from doing anything major with tax, due to the perilous state of the public finances and the inflation risks that have built up.

The Treasury is expecting growth in 2008 to be between 1.75 per cent and 2.25 per cent, before strengthening to 2.25 per cent - 2.75 per cent in 2009 and 2.5 - 3 per cent in 2010.

It expects this to be driven by low inflation, record levels of employment and low unemployment.

GDP likely to grow by 1.7 per cent 

Furthermore, the Treasury expects this to be combined with the government meeting its strict fiscal rules, supported by the current budget currently showing an average surplus as a percentage of GDP over the current cycle and that public sector net debt is expected to be maintained below the 40 per cent target.

Gifford is not as optimistic. "GDP is more likely to grow by only 1.7 per cent over the course of the year. Inflationary pressures will also remain a serious concern with the Bank of England unable to cut interest rates as fast as it would like to shore up the economy," he says.