Budget to reveal UK's bleak picture

The bleak deterioration in Britain's public finances will be laid bare in today's annual Budget, in spite of attempts by Alistair Darling, chancellor of the exchequer, to put the emphasis on measures which he claims will prepare for the recovery.

Mr Darling is expected to announce government borrowing will hit 12 per cent of gross domestic product for each of the next two years, in effect setting the agenda for a general election which must be held by June 2010.

The opposition Conservatives are already promising an era of austerity in the next parliament with a severe squeeze on public spending, and Mr Darling will today set out the governing Labour party's plans to fill a £175bn (€198bn, $257bn) annual borrowing hole.

Although public spending cuts and tax rises seem inevitable whoever wins the next election, Mr Darling will argue it makes sense to invest now to offset an expected contraction in the economy of more than 3 per cent this year.