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Confident chancellor

Robert Peston | 12:55 UK time, Wednesday, 12 March 2008

Alistair Darling is confident that the UK will avoid recession. He expects UK economic growth to slow down this year by a third to between 1.75% and 2.25% – but that would be faster than most of our major economic competitors, and is likely be massively better than the US, which may already be in recession.

But he acknowledges that this is no time to take money out of the economy through tax increases that bite with immediate effect. The main impact of tax increases will be after 2009.

So in 2008-9, he forecasts a relatively sharp increase in public borrowing to £43bn.

That won’t be seen by many as disastrously high, but still more than would be ideal at a time when the economic outlook is highly uncertain.

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The numbers are all made up...as is usual for this labour government. The truth is that he has no idea what growth will be, it's a wild guess. At least he's had the common sense to realise that the economy is on the cool and this is no time to squeeze more tax. However, the figures are fudged and even the £43 billion is pulled out of the ether. He hasn't accounted enough for the slowing economy having an impact on revenue collections.

  • 2.
  • At 02:50 PM on 12 Mar 2008,
  • p.kelly wrote:

Question:
The fella Darling got the 1.75-2.25% growth figure from - is he the same one he gets the 2.2% offficial inflation figure from? Old corkscrew Harry?

  • 3.
  • At 03:32 PM on 12 Mar 2008,
  • GF wrote:

"The numbers are all made up...as is usual for this labour government. The truth is that he has no idea what growth will be, it's a wild guess."

Surely that is the whole idea of forecasting. If Darling knew exactly what was going to happen in the future he wouldn't be a politician, he would be making billions in the city!

All forecasts are made up and just based on a set of assumptions. The point is to analyse the assumptions, to see whether they are overly optimistic or plausible.

  • 4.
  • At 04:10 PM on 12 Mar 2008,
  • Martin wrote:

Robert what's happened? I thought you were forecasting a credit crunch. The world was going to collapse in a mountain of toxic debt? Is the spin of Labour working again? Or have you changed your spin?

Reality is that taxes are up even as economy turns down. Where does the money go? It gets wasted.

  • 5.
  • At 06:07 PM on 12 Mar 2008,
  • Tony Cooper wrote:

Can someone please explain how Darling calculates the inflation 2.2% figure.
The man must leave in cloud cuckoo land.

  • 6.
  • At 05:04 PM on 13 Mar 2008,
  • Yummy Carol Kirkwood wrote:

The economic "miracle" of the last decade (good economic growth with low inflation) was all an illusion: the "growth" was funded by huge increases in borrowing, both private and public. Imagine just how little growth - if any - we would have seen if the Government had been prudent and adopted tax and spending policies that achieved a budget surplus instead of continuously increasing the budget deficit.

Now we find ourselves in the situation where the financial institutions are extremely reluctant to proffer even more credit to the over-indebted UK population, so private debt will no longer fund the country's economic growth. Instead, the Government intend to increase further the public debt mountain in the vain belief that they really are miracle-workers.

It was only 30 years ago that Labour destroyed this country's economy. And now New Labour look set to do it all over again. Congratulations to all of you who gave them the three consecutive election victories that allowed this to happen.

  • 7.
  • At 01:25 PM on 19 Mar 2008,
  • Matey Boy wrote:

A recession is now unavoidable simply because the inflation rate calculated by the Government doesn't reflect people's real spending.
Inflation for me and my family is around 25% and we're having to cut back on unnecessary items to cover power, shopping bills, and tax rises.
Most price increases are well above inflation, so Mr. Darling's calculations are based on a wrong assumption that inflation is around 2.5%.
I for one am taking my own judgement and bedding in for a recession.

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