PBR: Darling has done little to fix UK finances - Schroders

Schroders European economist Azad Zangana believes the measures proposed by Chancellor Alistair Darling in the Pre-Budget Report will do little to bring public finances back under control.

As expected, the Chancellor raised his public borrowing forecast by £5bn over the current and next three financial years, taking total borrowing to a £611bn.

Zangana describes Darling's attempts to offset the rising debt burden as simply "populist measures".

"From an economic perspective, today's measures are fairly neutral," Zangana says.

"More support for lower income families may help boost consumption at the margin, but the re-instatement of VAT at 17.5%, and the new 50% top rate of tax are likely to offset most of the gains."

Overall, Schroders believes the Chancellor's forecast for growth is too optimistic for 2011 and beyond.

"However, that does not mean public finances are beyond saving," Zangana adds. "Tough choices have to be made after the next election which will result in higher taxes and lower spending, ultimately leading to lower economic growth."