Chancellor Alistair Darling will today set out his view of Britain’s prospects for economic recovery as he delivers one of the most anxiously awaited budgets of recent years.

He is expected to reveal soaring public borrowing and confirm that Britain is in the most savage recession since the Second World War.

Meanwhile, tax increases and spending cuts from 2011 are likely, as Mr Darling announces plans to restore public finances.

Mr Darling admitted weeks ago that he had underestimated the impact of the recession. In November he said the economy was expected to contract between 0.75% and 1.25%. But economists now forecast a 3% drop in GDP, while the International Monetary Fund has predicted a fall of 3.8% in the U.K. economy this year, which would make this the worst recession since 1945.

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Many UK consumers are unaware that they have reduce tax payments on savings with products such as ISAs, according to a new survey.

Individual Savings Accounts, or ISAs, allow consumers to save up to £7,200 in stocks and shares or cash without having to pay tax on any interest accumulated. But research from insurance firm Scottish Widows has revealed that more than three million people in the UK do not know what an ISA actually is. Those in the 18-24 age bracket were least likely to be aware of tax-free savings accounts.

The study found that three quarters of respondents who had not previously put money away in savings are now considering doing so. Yet just a quarter of these intend to open an ISA in the next year, with another 16% saying they were unsure if they will.

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Nationwide is to buy a large part of the Dunfermline Building Society, which has collapsed under its unsustainable debts after the government declined to bail it out.

Under a deal announced this morning, Dunfermline’s branches, good loans and deposits have been sold to the Nationwide Building Society.

However, Nationwide has refused to buy up its high-risk assets, such as self-certification mortgages made at the height of the housing boom. The tax payer will have to foot the bill for these, along with bad loans from Bradford & Bingley.

Nationwide confirmed that Dunfermline, which was established 150 years ago, would keep its name. The building society warned of possible job losses in Dunfermline’s back office and support operations, but said there would be no compulsory redundancies in its branches in the next three years.

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MP’s have expressed dismay over the continued overpayment of tax credits.

A report from the Public Accounts Comittee has revealed that overpayments still stand at £1 billion a year. Between 2003 and 2007 overpayments amounted to £7.3 billion. £4 billion was clawed back from claimants at a later date.

The committee of MPs said that the overpayments were a burden on some of the poorest and most vulnerable members of society.

“The tax credit scheme was designed in such a way that there was always going to be a degree of overpayment,” said the conservative MP Edward Leigh, who chairs the Public Accounts Committee.

“It is the scale of that overpayment that has continually caused dismay.

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Scottish GPs have narrowly voted against a proposal to tax chocolate in the same way as alcohol and cigarettes as a way of tackling obesity.

GP David Walker from Lanarkshire said that Britons no longer considered chocolate a “treat” and that many were harmfully addicted to the food, which led to weight-related conditions like diabetes.

However, delegates at a British Medical Association (BMA) conference in Clydebank, West Dunbartonshire, voted against his proposals by just two votes.

Dr Walker said that he was “disappointed” at the outcome because he saw chocolate as a “major player” in problem weight gain, but was glad his suggestion had brought the issue of obesity into the public eye again.

Speaking immediately after the BMA vote, Dr Walker said, “A little of what you fancy may do you some good, but as nearly one in four people in Scotland are obese a lack of physical activity, an unhealthy diet and larger portion sizes are clearly taking their toll on the health of Scotland.

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Fewer people are applying for ISAs as the credit-crunch bites and consumers decide to pay off debts rather than save money.

Due to laws restricting the tax-free savings account to one cash ISA per person per year, people have traditionally flocked to banks at the beginning of the financial year in April to open an account. Last year, when the economy was still growing and savings rates were above 6%, the level of demand for ISAs was so high that many consumers experienced a delay in opening an account.

But a report from the Co-operative Bank suggests that this year’s “ISA season” will be a quiet one. According to the bank, the number of people taking out an ISA this year is due to drop by 13% to just 27%, compared with 40% a year ago. Worsening economic conditions and recent cuts in the official interest rate from 5% to 1% by the Bank of England have put consumers off saving, knowing that they will reap scant returns.

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The limit on tax-free ISA savings accounts should be boosted, top accountancy firm PricewaterhouseCoopers has said.

According to employee John Whiting, tax partner at PwC, the expanded threshold would help to offset losses caused to savers by falling interest rates following recent cuts in the Bank Rate by the Bank of England. Last month the institution cut savings rates to 1.5%, the lowest rate since its foundation in 1694.

The reduction in the Bank Rate has been passed on to savings accounts including the ISA, meaning that in spite of its tax-free status, the account is unlikely to earn savers much money.

Commenting on the return drop of ISAs, Mr Whiting said: “It would undoubtedly help if you increase the ISA limit because if you look at it another way the value of the ISA and the tax exemptions has dropped simply because the sort of returns you are getting on your ISA have dropped.

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The government will again pump hundreds of billions of pounds of taxpayers’ money into Britain’s damaged banking system, as it announced a second set of measures to insure banks against losses from bad debt in order to prevent the recession getting worse.

Under the new plan, the government will guarantee £100 billion of mortgage backed securities, and expand its existing £200 billion liquidity facilities, allowing banks access to liquidity until the end of the year. The government has also agreed to change the terms of its rescues of Northern Rock and the RBS Group. Rather than offering punitive rates of interest in order to get rid of its mortgage customers, as previously instructed, the state-owned Northern Rock will be told to offer more mortgages. The bank has also been given longer to pay back its loans from the government.

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Another feature of Alistair Darling’s debut budget was his decision to cut stamp duty on property purchases for first-time buyers and key workers with an annual household income of less than £60K looking for a new-build property; this cut, which comes into effect on 1st April, will see buyers on the New Build HomeBuy or Social HomeBuy shared-ownership schemes will be eligible for a cut in stamp duty.

Under the Chancellor’s new proposal, those who buys using one of these shared-ownership schemes is exempt from stamp duty until they own 80 per cent of the property, at which point they pay stamp duty at a reduced rate because it is only on the remaining 20 per cent. (more…)