The Chancellor’s devastating interview shows we need a Parliamentary statement on Monday to give us a completely new set of forecasts for the UK economy. Parliament should be in session to cross examine him over one of the biggest downward revisions to forecasts ever made by an incumbent Chancellor.
In March 2008 the Chancellor in his budget told the Commons the economy would grow by 1.75% to 2.25% in 2008, by 2.25% to 2.75% in 2009 and 2.5% to 3% in 2010. He said “My forecast shows the UK economy will continue to grow throughout this period of economic weakness”.
Today we learn that he now thinks the prospects are the worst for 60 years. That must mean, for example, a bigger fall in GDP than in 1979-81, when it fell by 1.76%. He also says now “It is going to be more profound and long lasting than people thought” which must mean he expects downturn next year as well as this. If just one year shows a drop of 2% (Chancellor’s implied new forecast) that means 4% less National Income, a loss of £60 billion compared to budget forecast. That also implies a loss of £24billion of tax revenue at the average 40% tax rate on the economy as a whole.
We have already had one quarter’s figures showing no growth compared with the reasonable growth the Chancellor was forecasting. He now tells us to expect a bad downturn, worse than any of the private sector forecasters are expecting.
This means more job losses, more increases in public spending to help people who lose their job, less tax revenue as the economy falls. The figures involved will be huge. There will be a vast black hole in the government’s accounts.
It is high time the government recalled Parliament, made an honest statement to the Commons, and produced some new figures. The rest of the country is now very worried by the situation. It is not good enough for MPs to be away for a further five weeks, and for the government to delay new figures until the Autumn Statement. Mr Darling’s careless language may be just that – but as it has been his only attempt to revise his optimistic March forecasts we have to take it seriously until he corrects the record again. The man who told us not to talk ourselves into recession has now conjured a far worse picture for us than any mainstream commentator!
August 30, 2008
Darling's statements are reckless and casual in the extreme. First we have a throw away headline about stamp duty which smashes a fragile housing market and a point blank refusal to address that in a timely manner, now these remarks which must shatter any remaining confidence. CEO's of companies are prevented by law from making remarks of this nature, for our Chancellor to do it in a friendly magazine piece is quite appalling. What price a "Denis Healey" style, cap-in-hand trip to the IMF when the money runs out?
Can you think of a Labour government that hasn't either eventually devalued the currency or gone bust and had to make the IMF run? Me neither.
August 30, 2008
I hope you don't expect the Chancellor to tell you the truth John. Every number he will spin will be "seasonably adjusted" that is, frigged! The discount market is expecting the Treasury to issue about £100 billion of IOUs in the next twelve months. The BoE will have to find a mechanism to stop the Banks and the MFIs from hoarding it rather than lending it.
Anyway, he will probably be worrying about the "technical problems" that will mysteriously appear in the Trans-Poland gas pipe – Russia to Germany – that will coincide with the EU meeting to discuss sanctions on Russia over the Georgia incident.
Remember John; In a time of deceit telling the truth is a revolutionary act [Orwell]. Watch out for Jacqui "Stasi" Smith snooping in your digital dustbin.
August 30, 2008
The cynical option is that Darling is deliberately talking up a recession so that when it is not that bad he & his party can take credit in 2 years time.
The more cynical option is that he is out of his depth while simultaneously running round in circles with his head cut off.
I incline to the latter. There is certainly no justification in terms of the world economy for expecting a world recession. OK China's growth rate is down to 9% – that is still 9% upwards. Technology is improving faster than ever, oil prices are now falling & most other commodities have been falling in real terms for ages. If there is a recession, let alone the worst for 60 years it will be entirely because of incompetent over-government.
As you say what the Chancellor says has a real influence on what people do. If the Chancellor's assessment is not borne out by official estimates he must go. If it is he must carry a major share of the blame & should go.
August 30, 2008
I agrre that Darling is out of his depth. I don't mind telling you that I am getting very worried indeed about the damage that is going to be caused to the country during this downturn. We seem to have nothing left in reserve now. Once we start sinking perhaps this time the damage will be permament?
August 30, 2008
I agree with JR entirely. I would add that if the nation's finances have suddenly entered such a vulnerable state this must put at risk the security and life of the nation. Therefore we need to have a general election so Her Majesty The Queen can choose a new set of ministers who enjoy the confidence of the people.
August 31, 2008
I'm not the same person as the Adam below. He asks very pertinent questions though. I would treat Darling's statements with a high degree of caution. I stopped believing anything Labour said way way back. I suppose that's why they say two contradictory things, we wrongly assume one of them is true.
August 30, 2008
Is this hyperbole, or have Labour really managed to revert us to the bankrupt economy of post-war Britain in ten years flat?
Should I panic and sell my sterling while a tenner can still buy me several loaves of bread?
August 30, 2008
What's the point in having MPs if they aren't holding the government to account? I wrote to my MP with my concerns over inflation and national debt and the reply was along the lines of "you aren't homeless, therefore I have no interest in helping you". I didn't ask for a hand-out! John you seem to be in a tiny minority of people who think that governments should be questioned at all times.
August 30, 2008
In the 60s it seemed that the British Constitution was, like the Rock of Ages, inviolable. Queen in Parliament assembled and all that.
Over the years, both parties, yes, both, have eroded the parliament and over the past, disastrous, decade they have started on Her Majesty too. I suppose that was inevitable.
Now, of course, just when the future needs discussion, it stands to reason that the Ministers have to Deal With it Themselves.
Two things I can assure you will not happen:
1. There will not be a sensible discussion of the economic future by experts in parliament. I suspect instead that there will be a knee jerk reaction to the Labour backwoodsmens' suggestion of a windfall tax on, of all things, the power providers!
2. There will never, under New Labour, be a judicious roll-back of state expenditure.
You, John, must be fuming!