Britannia Radio

If this isn’t a gloomy outlook, I don’t know what is!    IMF  
forecasts borrowing of £140 bn in the next two years £280bn in total.

Just for the sake of illustration assume that the government sale of  
Gilts is at 4%. That means that each year until we pay it back we  
will  have to find an extra £ 5-6bn in interest charges which takes  
priority over everything else!  The IFS predicts much more (£20bn a  
year extra) but all roads lead to swingeing tax increases unless  
somebody has the guts to make some deep cuts in spending.

Now tell the public how clever Brown has been.

Darling to my eyes appears to be making as clean a breast of it as he  
can for he can clearly see that Brown cares for no one but Brown and  
that he, Darling, is being fattened up for the butcher’s knife.

xxxxxxxxxxxxxxx cs
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FINANCIAL TIMES            6.4.09
Darling poised to admit forecast error
    By Alex Barker and Vanessa Houlder

Alistair Darling yesterday prepared to acknowledge the biggest  
forecasting error made by a British chancellor, warning there was  
unlikely to be a resurgence in the economy this year.

Mr Darling is expected to use his April 22 Budget to admit the  
recession is much worse than he forecast, predicting the economy will  
shrink by at least 3 per cent in 2009 and that the deficit will top  
10 per cent of national income.

This amounts to the most drastic revision of a chancellor's Budget  
debt forecasts in modern history, laying bare a rapid deterioration  
in public finances that will usher in an era of fiscal austerity.

Mr Darling admitted yesterday that the severity of the recession was  
"far greater" than people were expecting last year. A 3 per cent  
slide in growth is three times worse than that predicted in the pre- 
Budget report in November, which envisaged the economy picking up in  
the summer.

"Economies saw a severe downturn in the first three months of this  
year," he told the BBC. "I have seen nothing that doesn't tell me  
that this position is going to be equally bad."

The admission comes as Gordon Brown seeks to capitalise on a well- 
received G20 conference, amid signs that the Labour party has enjoyed  
a post-summit lift in polls that closes the gap with the Conservatives.
Tomorrow Mr Brown will meet with (the) chancellor, the governor of  
the Bank of England and chairman of the Financial Services Authority  
to drive the implementation of the G20 conclusions.

The Conservatives seized on the expected revision, claiming it  
exposed "a record of incompetence that speaks for itself". George  
Osborne, shadow chancellor, asked if anyone would "believe Gordon  
Brown's claims about his economic policies ever again".


Meanwhile, Ken Clarke, shadow business secretary, warned that  
sterling and government debt sales would be in "terrible trouble"  
unless Mr Darling delivered a more credible economic assessment.

Many economists regard even a 3 per cent contraction for the UK as  
optimistic. The International Monetary Fund said Britain would be  
among the hardest-hit countries this year with its economy shrinking  
by 3.8 per cent, while the Organisation for Economic Co-operation and  
Development said it expected a 3.7 per cent slide.

The collapse in growth will cast an even darker shadow over the  
public finances.

In November, the government [said] it's deficit would increase to  
£118bn in 2009-10, or 8 per cent of gross domestic product, a  
forecast that seemed shocking to many economists at the time. But  
City forecasts and those from the IMF now suggest borrowing of £140bn- 
£170bn in the two following years.

In his autobiography, Denis Healey, former Labour chancellor, claims  
the title of making the worst debt forecasting error in his 1974  
Budget, after underestimating the levels of public debt by about 5.4  
per cent of GDP.

Mr Darling's maiden Budget in 2008 estimated public borrowing at 2.5  
per cent of national income in 2009 - a figure likely to be four or  
five times short of what will be needed.
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TELEGRAPH                6.4.09
Taxpayers face £500 bill to plug Britain's black hole
Taxes will have to rise again to plug a multi-billion pound black- 
hole in the public finances following the economic crisis, Alistair  
Darling will indicate in this month’s budget.

    By Robert Winnett and James Kirkup

Despite already announcing a new 45p higher rate of income tax and a  
rise in National Insurance, a range of other future tax rises are now  
understood to be under consideration. This could include an increase  
in Vat.

The extra tax rises are expected after the Chancellor admitted that  
the Treasury had underestimated the seriousness of the recession.

Mr Darling said last autumn that Britain would begin emerging from  
the downturn in the summer. However, he admitted yesterday that this  
was now unlikely to happen before the end of the year.

The Government will be forced to borrow tens of billions more which  
experts predict will lead to the typical taxpayer facing an extra  
£500 a year on the average bill after the next election.

Today, the Institute of Fiscal Studies (IFS), a respected economic  
forecaster, will produce detailed estimates on the damage done to the  
public finances by the recession. It is expected to warn that Britain  
has had to borrow almost £20 billion more than expected over the past  
year.

During the 2009-10 financial year, the IFS is likely to predict that  
borrowing will increase to more than £150 billion - £30 billion more  
than expected. The forecaster will warn that taxes will have to rise  
by more than £20 billion a year, and possibly far more, to fund the  
shortfall.

To repay the debts, Treasury officials are now working on plans for  
future tax rises - and Government spending reductions - which are  
expected to be implemented from 2010.

There were fears last night that the tax claw-back may include an  
increase in Vat. The tax was reduced temporarily from 17.5% to 15% as  
part of last year’s controversial fiscal stimulus package.

However, it may now rise to up to 20% after the next election.  
Documents released last year revealed that the Government previously  
considered such an increase.

The tax increases are necessary to reassure the financial markets  
that Britain has a properly funded economic recovery plan.

Last month, Britain failed to sell gilts - government debt - for the  
first time in more than a decade and investors are seeking  
reassurance that the country has plans to repay the record levels of  
Government debt currently being incurred.

Last night it was claimed that Whitehall officials have privately  
warned that the Treasury is now preparing for a decade-long recovery  
period for the public finances.

During this period [10 years! -cs] , many key public services -  
including the Transport system - are expected to see only negligible  
increases in spending.

An account of a meeting of Transport department officials claimed  
that the Chancellor was aiming to bring the public finances “back on  
track over a seven to ten year time horizon”.

A note of the meeting circulated in Westminster stated: “They [the  
officials] observed that this couldn’t be done without significant  
cuts in public spending or increases in personal taxation (or both).”

Yesterday, the Chancellor conceded that his previous prediction that  
Britain would emerge from recession by this summer had been too  
optimistic.
“There is no doubt that the depth of this recession, here and across  
the world is far greater than people were predicting last year,” he  
said.
In the interview, Mr Darling also played down suggestions that a  
further fiscal stimulus package of tax cuts and public spending rises  
during the recession would be announced in the budget on April 22nd.  
The Prime Minister was understood to be in favour of such a package.

Treasury aides indicated that although there would be “targeted” help  
for the unemployed, pensioners and other groups there was unlikely to  
be a mass giveaway.

They also stressed that the chancellor was focussed on “medium term  
fiscal sustainability” - which experts said meant that future tax  
rises to balance the books were being planned.

Mr Darling said: “I have to balance the need to support our economy  
with the fact that you have got to ensure that, in the medium term,  
all countries live within their means. I have to reach a judgment and  
I will reach a judgment.”

The comments were seized upon by the Conservatives, who attempted to  
block last year’s Vat cut on the basis that Britain could not afford  
to borrow the extra billions needed to finance the move.

George Osborne, the shadow Chancellor, said: “Why would anyone  
believe Gordon Brown’s claims about his economic policies ever again?
“When the Prime Minister and the Chancellor made their recession  
forecast last autumn, we along with almost every independent  
forecaster said it was likely to be wrong - but they wouldn’t listen.  
The result is that unemployment will be higher, borrowing will be  
greater and the recovery more difficult. Budget Day looks like being  
the day when Labour’s failures are finally laid bare.”

Frank Field, the former Labour minister, said that Mr Darling must  
announce drastic and unpopular measures to reassure the markets.
“The test of the Government will come in the Budget, which needs to  
contain announcements of immediate tax increases for this financial  
year, over and above those already set out for after the next  
election,” he said.  [This suggests that he fears that only cosmetic  
changes will come in the budget - the big changes would wait till  
after the voters had had their say -cs]

The Prime Minister will today hold a G20 implementation meeting with  
Mervyn King, the Governor of the Bank of England, and Lord Turner,  
the chairman of the FSA. He will also write to tax havens including  
the Channel Islands and Gibraltar urging them to immediately adopt  
international agreements to stop banking secrecy.

Mr Brown is hoping to build on an opinion poll yesterday which showed  
that the Conservative lead over Labour had narrowed to seven  
percentage points following last week’s G20 summit in London.
However, Mr Brown insisted that he was not considering calling a  
general election. “Our first priority, and it is our first priority,  
is jobs and it’s homes and it’s businesses,” he said.

“That’s the only thing on my mind at the moment - how we can take the  
action that is necessary to take us through this downturn."  [Hey!   
the “downturn” ended with the “recession” which in its turn has  
become a “slump”. -cs]