The Chancellorâ€™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 â€œMy forecast shows the UK economy will continue to grow throughout this period of economic weaknessâ€.
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 â€œIt is going to be more profound and long lasting than people thoughtâ€ which must mean he expects downturn next year as well as this. If just one year shows a drop of 2% (Chancellorâ€™s implied new forecast) that means 4% less National Income, a loss of Â£60 billion compared to budget forecast. That also implies a loss of Â£24billion of tax revenue at the average 40% tax rate on the economy as a whole.
We have already had one quarterâ€™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 governmentâ€™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 Darlingâ€™s careless language may be just that â€“ 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!