London shares jump after Budget announcement

The FTSE 100 made a dramatic turn in direction yesterday after chancellor Alistair Darling delivered his 2009 Budget. As he began to speak the index slumped by almost 40 points. By the close, however it had made impressive gains of 43.2 points. Traders were divided over the reasons for the move.

There was widespread disbelief in the City of Mr Darling's forecast of 1.25 per cent growth for next year and some pinned the gains on the first back-to-back monthly rise in US property prices for two years. Property shares led the rally in London, with Land Securities up 6.5 per cent and Hammerson gaining over 10 per cent and retailers and banks not far behind.

Elsewhere there was scorn for the Chancellor's forecasts as he was forced to concede that the recession is on a par with the Great Depression and yet claimed that it would be finished by Christmas. He slashed his estimate for this year's growth to -3.5 per cent and unveiled a dramatic increase in government borrowing to fund the shortfall in the UK's finances.

The Government will have to borrow at least £175bn this year and £173bn next year, based on his own forecasts and at over 12 per cent of output this will leave the country in the worst fiscal position since World War II.

WHAT THEY ARE SAYING
Editorial, Financial Times: "Alistair Darling looked like someone facing a wide and deep chasm with the materials for a short and rickety bridge. In his second Budget, the Chancellor's most important task was to explain how to put the UK's public finances on a sustainable basis. Labour MPs were also hoping he would enhance his party’s popularity on the way to the election. He did better on the second than the first. The plan to raise the top rate of income tax to 50 per cent from next April was astute political tactics, although poor revenue raising. But the grim state of Britain's books made bleak reading and the fragile optimism behind Mr Darling's plan for getting from here to fiscal rectitude could not be disguised."

Editorial, the Times: "Labour is once again the party of massive public debt, inadequately controlled public spending and taxes on the wealthy. In the past year we tumbled into recession, bailed out the banks and funded a fiscal stimulus. Yesterday we looked to the Chancellor to say how it would be paid for. The orchestra assembled. The audience settled expectantly. The conductor tapped his baton on his music stand. A hush fell. And from the stage came the shrill, thin sound of a penny whistle."

Simon Heffer, Daily Telegraph: "Wednesday's events were definitive. They showed that Labour has reverted to being a class-based party, and like all such parties is determined to rob the class in which it is not based. Those tens of millions of Britons who work hard, save hard, take responsibility for themselves and make no claim on the state are to be targeted to provide the resources to help Labour secure re-election. The Budget was the most naked attack on the middle classes since the 1970s. By this act of bigotry, Labour has repatriated us to the land of flared trousers, British Leyland and the Bay City Rollers." ·