Business groups were strongly critical of the Budget, with all leading organisations saying that its forecasts for growth were overly optimistic. Employers attacked the increase in the top rate of tax as damaging to Britain’s competitiveness.

Richard Lambert, Director-General of the CBI, denounced the Budget’s credibility because of its growth assumptions and prospects for public finances. He said: “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.

“The Chancellor’s economic forecasts, with a rapid end to the recession and well above trend growth from 2011-14, look optimistic. Even so, the horizon for balancing the books has been extended to 2018, two years later than previously targeted. With annual government bond issue expected to exceed £200 billion in the coming years and debt doubling by 2013, the Government is running too much of a risk with the willingness of investors to finance UK debt.”

David Frost, director-general of the British Chambers of Commerce, was also sceptical. He said: “His expectation of 1.25 per cent economic growth in 2010 is too optimistic, even if growth resumes towards the end of the year. More significantly, his assumptions of very rapid growth for a number of years from 2011 onwards are unrealistic.”

On the lifting of the top rate of tax to 50 per cent for those earning more than £150,000 a year, he said: “A major concern has been raised over the income tax hike for the highest earners. The strength of the UK has been as a low-tax economy, giving us a competitive advantage and able to attract the most highly skilled workers. The top tax rate in France and Germany is 40 per cent and 45 per cent respectively, giving us the highest top rate of our major European competitors.”

Miles Templeman, director-general of the Institute of Directors, said: “The increase in the top rate of income tax to 50 per cent sends out all the wrong signals. The increase will affect very few IoD members but it will have a damaging impact on the wider economy and undermine the UK’s attractiveness as a place to invest.”

Gilbert Toppin, director-general of the EEF manufacturers’ organisation, added to the criticism over the growth forecasts. He also complained about the lack of wage support for companies with employees on short-time working. “Manufacturers will also be disappointed that the Chancellor has hit them with the double whammy of failing to provide support for short-time working whilst increasing the costs of redundancy.”

Andrew Smith, chief economist at KPMG, declared the Budget’s economic forecasts to be “a triumph of hope over experience”. He said: “Despite having to drastically downgrade his forecast for growth this year, the Chancellor still expects the economy to rebound over the next two years.

“Even though Mr Darling insists that the end of the recession is in sight, we are still looking at eyewatering budget deficits and a doubling of public debt. And if the Chancellor’s growth forecasts again prove overoptimistic, the public finances will turn out even worse.”

Unions criticised the Budget for failing to pump enough money into the wider economy and for spending cuts. Brendan Barber, the TUC General Secretary, said that while the Budget offered some welcome measures, especially for the young unemployed, “it is does not bring the same boldness and vigour to getting the real economy right as the Government showed in dealing with the banking collapse”. He said: “The biggest drain on the public finances will be continuing mass unemployment and we needed a bigger and better-targeted stimulus to the economy today. A 0.5 per cent boost in public spending is not enough this year. Next year’s tightening is too much, too soon.”

Dave Prentis, general secretary of Unison, warned that public sector unions would fight more cuts to public spending. He said: “At a time of recession, ordinary people rely on public services more and more to get them through the worst of it. If the Government wants to grow its way out of recession, public services must be the roots.” Finance directors in Britain’s biggest businesses are to be held personally responsible for errors in the company accounts and face thousands of pounds in fines if the accounting systems are not up to scratch. There are fears that the new rules could drive businesses to countries with less onerous tax regimes.

Finance directors or senior accountants in all companies will be required to certify that their accounting systems are accurate each year. If Revenue & Customs finds any careless or deliberate failure in the company’s systems, finance directors could face fines of up to £5,000, while the company would be forced to repay any unpaid tax plus a penalty charge of up to 30 per cent of this sum.

Alex Henderson, tax partner at PricewaterhouseCoopers, said: “The City well remembers how tax change and regulation can lead to migration of business. Quite a few finance directors will be losing sleep over this.”

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