It'll take more than this to drag the UK out of recession
So, that was the Budget that was – a blueprint to drag the economy out of the mire. Or, at least, that’s what our beloved Chancellor would have us believe.
Trouble is, that mire has been shown to be a great deal soggier and muddier than the one Darling describes.
A little over an hour after Britain’s finance minister sat down yesterday in Parliament, the International Monetary Fund’s chief economist, Oliver Blanchard, delivered a damning assessment of the state of the global economy.
Suddenly, Darling’s projections look hopelessly optimistic.
The Chancellor’s worse-case scenario for 2009? Contraction of 3.75 per cent. IMF forecast? 4.1 per cent.
Next year? Well, in just a few short months, Darling expects us to have turned the corner, predicting growth – yes, that’s growth – of between 0.1 and 1.5 per cent.
Cloud Cuckoo Land says the IMF. Its gloomy prognosis is that UK output will continue to contract
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falling 0.4 per cent during the course of 2010.
According to the IMF, the UK is being particularly hard hit by the collapse in the property market and the credit crisis which has stalled lending to businesses and consumers.
Darling is right, of course, in labelling the downturn a global phenomenon. No economy has been left unscathed.
Contained in yesterday’s IMF report is a dismal outlook for world trade
– the engine of global growth since the end of the Second World War.
Volumes are forecast to slump 11 per cent in 2009, before recovering to little more than flat next year.
Then there’s the inevitable impact on jobs.
The organisation’s projected 1.3 per cent decline in the global economy this year translates into the loss of at least ten million jobs, economists warn.
Even more dire forecasts from some quarters of a 2 per cent contraction would mean 15 million to 25 million additional people out of work.
The IMF believes that without the massive programmes of government spending launched around the world we would be facing a full-on depression.
Blanchard’s advice is pretty clear.
"Governments should today basically think at least about contingent plans for infrastructure spending ... Next year will be too late," he warned yesterday.
So, tax cuts and more public spending would appear to be the order of the day. Unfortunately, yesterday’s Budget was more about tax rises and economising.
Having played his get out of jail card, Darling will be hoping that the sums do add up. Perhaps we will see the recession peter out by the end of the year (remember those recent green shoots?). Not likely, says the IMF (and a host of other economic types).
Those public finances may need to be stretched a great deal further before we see daylight.
