Darling ups borrowing sharply

By Sumeet Desai

LONDON (Reuters) - Chancellor Alistair Darling cut forecasts for growth and ramped up borrowing on Wednesday, as the economy battles with a global credit crunch and his government slides in the polls.

In his first budget, Darling also jacked up taxes on alcohol and gas-guzzling cars, found a bit of cash for pensioners and tackling child poverty and postponed a planned rise in fuel duty, but the overall package was fairly neutral.

Government borrowing will rise far more than expected -- by 7 billion pounds alone in the coming fiscal year. Part of that was refinancing loans to nationalised bank Northern Rock but either way analysts said the public finances were in bad shape.

Darling blamed the world economy.

"Turbulence in global financial markets which started in the American mortgage market has affected all economies from the United States to Asia, as well as Europe," the 54-year old Scot told parliament.

He now sees the British economy growing by around 2 percent in 2008 and 2.25 percent in 2009, half a percentage point lower in both cases than the forecast made only last October. Analysts polled by Reuters predict 1.8 and 1.9 percent respectively.

Darling said government borrowing would hit 43 billion pounds in the coming financial year and 38 billion the year after, well above the 36 billion pounds and 31 billion that he had predicted in October.

UK government bond futures fell sharply as Britain said debt issuance over the fiscal 2008/09 year would be much higher than expected, at 80 billion pounds.