Chancellor Alistair Darling has targeted high earners with a new 50p top rate of tax in an attempt to rebuild Britain's battered public finances as he revealed that borrowing this year will soar to a record £175 billion.
In a bleak Budget statement, Mr Darling confirmed that the UK was in the grip of the deepest recession since the Second World War, with the economy set to shrink by 3.5% in 2009 - more than double his previous forecast.
However he surprised many analysts by predicting the country would return to growth before the end of the year - enabling him to halve borrowing levels within four years.
He set out plans for a tax and spending squeeze that will bring in £6 billion by 2012 rising to £17 billion by 2014, although that will still not bring the Budget back into balance until 2018.
His calculations, however, depend upon a forecast growth rate of 1.25% next year, rising to a heady 3.5% in 2011.
But within an hour-and-a-half of his Commons statement, the International Monetary Fund issued its own forecasts, predicting the UK will still be in recession next year, shrinking by a further 0.4%.
The IMF forecast for the current year was also more pessimistic than the Chancellor's, estimating a 4.1% contraction in output.
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Mr Darling insisted that he had "good grounds" to be confident following the concerted action taken by governments around the world to stimulate their economies.
However, the Tories said that he had delivered a "dishonest Budget" based on "fantasy forecasts".
The Confederation of British Industry also cast doubt on Mr Darling's figures saying that they looked "optimistic".
"The key question for this Budget was whether it set out a credible and rigorous path for restoring the public finances to health. The CBI's preliminary judgment must be that it does not," said CBI director general Richard Lambert.
"The Chancellor's economic forecasts for next year and beyond look optimistic. By pushing out the horizon for balancing the books as far as 2018 the Government is running too much of a risk."
His comments were a blow for Mr Darling who needs to convince the markets that he can get the public finances back on track if he is to be able to continue the borrowing he needs to get through the recession.
This year's estimated total of £175 billion represents 12.4% of national output, while Mr Darling said that it will be almost as high next year at £173 billion, before it starts to fall back, dropping to £97 billion in 2013-14.
In four years, accumulated public sector debt will have reached more than £1.4 trillion - 79% of GDP - if the estimated £60 billion bill for the bank bailout is taken into account.
In the main surprise of a heavily-trailed package, the Chancellor announced that he was raising the planned new top rate of tax on incomes over £150,000 from 45% to 50%.
