Budget 08: Darling's speech in full

Mr Deputy Speaker, between the early 1970s and the mid 1990s the UK was one of the least stable economies in the G7. Today we are the most stable.

In the past our economy suffered from high unemployment and high inflation but today unemployment is lower than in Germany, France and Italy.

Welfare reform makes work pay and encourages people off benefits. The strengthened competition regime has increased the flexibility of product and labour markets, backed by fair employment laws.

So, the reforms we have made since 1997 – independence for the Bank of England and tough fiscal rules – mean that Britain is now more resilient and better prepared to deal with future shocks. And is better equipped to meet the challenges of rapid global change.

We are developing new strengths in the industries of the future – creative industries account for 7 per cent of the economy; pharmaceuticals account for a quarter of the UK's research and development.

Ours is the only major industrial economy to see an increasing share of trade in global services – from 7 per cent a decade ago to 8 ¼ per cent today.

In knowledge-intensive services, the UK is second only to the United States. High-tech manufacturing has grown by 30 per cent in the last ten years.

Driven by improved productivity, the UK’s GDP per head - the average income for every man, woman and child - has gone from the lowest amongst the group of seven leading industrial economies in the early 1990s to being second only to the United States last year.

Mr Deputy Speaker, right across the world, countries have lowered their forecasts for growth in the coming year.

In Japan, growth is forecast to be 1.4 per cent, in the Euro area and the United States 1.6 per cent, and in Canada, 1.8 per cent.

And even the fastest growing markets: China, India and Brazil, which have enjoyed record growth in recent years, are expected to slow.

Despite the slowdown in the world economy, in 2007 the British economy grew by 3 per cent – the fastest growth of any major economy.

This year my forecast is that – as growth in the world economy slows further – growth in the British economy will be between 1¾ and 2¼ per cent in 2008 – but faster than Japan, the US and the Euro area.

I expect growth to shift towards companies and exports with growth rising to 2 ¼ to 2 ¾ in 2009 and 2 ½ to 3 per cent by 2010.

So Mr Deputy Speaker, my forecast shows the UK economy will continue to grow throughout this period of global uncertainty – a view supported by the Bank of England, the International Monetary Fund and the Organisation for Economic Co-operation and Development.

Mr Deputy Speaker, in the past, inflation has overshadowed many Budgets. From the 1970s until the early 1990s, the British economy suffered through the failure of successive governments to deliver economic stability.

Mr Deputy Speaker, we have seen recent increases in world food, fuel and energy prices.

The reforms we have made since 1997 mean we can be confident about the inflation outlook. There will be no return to the inflation rates of the early 1990s.

As is happening in many countries because of commodity prices, inflation in the UK will rise in the short term as higher oil and food prices feed through into domestic inflation.

But inflation is forecast to return to target in 2009 and remain on target thereafter.

The success of the Monetary Policy Committee and the resilience of the UK economy is clear. Energy prices have tripled since 2002, but over this period inflation has averaged just 2 per cent and growth has averaged 2 ¾ percent.

In the past our economy suffered from high unemployment and high inflation but today unemployment is lower than in Germany, France and Italy.

Welfare reform makes work pay and encourages people off benefits. The strengthened competition regime has increased the flexibility of product and labour markets, backed by fair employment laws.

So, the reforms we have made since 1997 – independence for the Bank of England and tough fiscal rules – mean that Britain is now more resilient and better prepared to deal with future shocks. And is better equipped to meet the challenges of rapid global change.

We are developing new strengths in the industries of the future – creative industries account for 7 per cent of the economy; pharmaceuticals account for a quarter of the UK's research and development.

Ours is the only major industrial economy to see an increasing share of trade in global services – from 7 per cent a decade ago to 8 ¼ per cent today.

In knowledge-intensive services, the UK is second only to the United States. High-tech manufacturing has grown by 30 per cent in the last ten years.

Driven by improved productivity, the UK’s GDP per head - the average income for every man, woman and child - has gone from the lowest amongst the group of seven leading industrial economies in the early 1990s to being second only to the United States last year.

Mr Deputy Speaker, right across the world, countries have lowered their forecasts for growth in the coming year.

In Japan, growth is forecast to be 1.4 per cent, in the Euro area and the United States 1.6 per cent, and in Canada, 1.8 per cent.

And even the fastest growing markets: China, India and Brazil, which have enjoyed record growth in recent years, are expected to slow.

Despite the slowdown in the world economy, in 2007 the British economy grew by 3 per cent – the fastest growth of any major economy.

This year my forecast is that – as growth in the world economy slows further – growth in the British economy will be between 1¾ and 2¼ per cent in 2008 – but faster than Japan, the US and the Euro area.

I expect growth to shift towards companies and exports with growth rising to 2 ¼ to 2 ¾ in 2009 and 2 ½ to 3 per cent by 2010.

So Mr Deputy Speaker, my forecast shows the UK economy will continue to grow throughout this period of global uncertainty – a view supported by the Bank of England, the International Monetary Fund and the Organisation for Economic Co-operation and Development.

Mr Deputy Speaker, in the past, inflation has overshadowed many Budgets. From the 1970s until the early 1990s, the British economy suffered through the failure of successive governments to deliver economic stability.

Mr Deputy Speaker, we have seen recent increases in world food, fuel and energy prices.

The reforms we have made since 1997 mean we can be confident about the inflation outlook. There will be no return to the inflation rates of the early 1990s.

As is happening in many countries because of commodity prices, inflation in the UK will rise in the short term as higher oil and food prices feed through into domestic inflation.

But inflation is forecast to return to target in 2009 and remain on target thereafter.

The success of the Monetary Policy Committee and the resilience of the UK economy is clear. Energy prices have tripled since 2002, but over this period inflation has averaged just 2 per cent and growth has averaged 2 ¾ percent.