London - Britain will unveil a recession-fighting budget this week, seen as vital for Prime Minister Gordon Brown as he struggles to boost his flagging fortunes ahead of a likely election next year.
Finance minister Alistair Darling will deliver the government's 2009/2010 taxation and spending plans before parliament on Wednesday amid a global financial crisis which has dragged the world into a sharp economic downturn.
Britain, in its first recession since 1991, has been hit hard and is battling soaring unemployment and public debt, plus a slumping property market and tax revenues.
"It's an important budget, and the one by which the government will be judged by in the next general election - including how it manages this recession," said Oxford University economics professor Linda Yueh.
Brown, meanwhile, will be hoping it can turn the page on a string of recent political scandals, including this month's resignation of a top adviser over a planned smear campaign against the main opposition Conservative Party.
Calling it "one of the most important budgets since the Second World War", the Daily Telegraph newspaper said in an editorial on Saturday: "We need a safe budget to restore trust in politics".
The government's options look limited, though - experts warn that tax cuts or public spending increases would be hard to justify because of stretched public finances in the current dire economic climate.
The public purse has 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.
Darling, whose official title is Chancellor of the Exchequer, is also expected to rip up his economic growth projections on Wednesday in light of a deepening recession which began in the second half of 2008.
"He will have to concede that the economy will now contract much more sharply this year than he previously expected, while next year's recovery may also be weaker," Capital Economics analyst Jonathan Loynes said.
Andrew Oswald, economics professor at Warwick University, predicted the chancellor would attempt to stimulate growth, particularly with measures aimed at youth unemployment.
In the pre-budget report last November, Darling launched a £20bn economic stimulus package of tax cuts in an attempt to get consumers spending again.
However, he cautioned that any such measures would not feed through into economic activity for some time.
"We can't expect the budget of spring 2009 to have any real effect until winter at the very earliest, and probably into 2010.
"There should be some effect from the new budget by 2010, but it is salutary to remember how slowly the economy can be shaped by policy-makers."
Ahead of the budget, Darling has already deferred plans to increase business rates by 5.0 percent this month, saying he would stagger the increase over the next two years instead.
Meanwhile, speculation is building that the government could launch a scrappage scheme to boost the crisis-hit carmaking sector with incentives for motorists to swap old cars for new models.
Brown has said the budget will target unemployment, after the claimant count surged past two million people in the three months to January - and breached the barrier for the first time since Labour came to power in 1997.
"Next week's budget will be a budget about jobs," Brown told an audience on Thursday in Glasgow.
"We will want to help people who are unemployed back into jobs, we will want to give people the skills for the future so they can get the jobs of the future."
Darling had forecast in November that the economy would shrink by 0.75-1.25% in 2009. He predicted it would rebound in 2010 with growth of 1.5-2.0% and would continue to recover in the following years.
The economy grew by 0.7% in 2008, which was the slowest annual rate since 1992 and a dramatic slowdown after 3.0% expansion in 2007.
"The official 2009 forecasts will undoubtedly be lowered, something Chancellor Darling acknowledged recently," said Investec economist David Page.
"We fully expect the Treasury to downgrade its view for 2009 savagely and pencil in minus 3.0%-3.5% for this year. This would be the worst GDP fall recorded in the UK since 1945."
- AFP