Britannia Radio

This is a long round-up posting setting out the dreadful state that 
Brown has brought us to.  Some are still in denial but the Labour 
party is playing games.  They have virtually given up on the election 
and are striking poses about trying to 'help the workers'  for the 
election after the 2010 one,  while leaving the father and mother of 
a mess for the present opposition to clear up.

XXXXXXXXXXXXXXXXXX CS
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TELEGRAPH 20.4.09
1. Recession 'deeper and more painful' than expected
The recession will be deeper than expected and any recovery is not 
likely until next Spring, the CBI has forecast.

By Richard Tyler

The dire prediction contrasts with Alistair Darling's view of the 
country's prospects, with the Chancellor likely to say this week that 
the recession should end this year.

Mr Darling will, however, admit in his Budget speech on Wednesday 
that his prediction that gross domestic product (GDP) would only 
decline by up to 1.25pc, made in November, was overly optimistic and 
that he is now planning the public finances based on a 3.5pc fall in 
GDP this year. [The IMF puts that as the optimistic end of its range! 
-cs]

The CBI said the global economy had weakened significantly since 
February. The employers' body now predicts a 3.9pc fall in GDP this 
year, down from the 3.3pc it forecast two months ago. However, it 
still believes the recession will not be as severe as the one that 
hit Britain during the early 1980s.

Richard Lambert, the CBI's director general, said that the 
combination of low interest rates, the Bank of England's decision to 
print more money, the weaker pound, and low inflation should mean the 
economy's rate of decline will slow through the year before beginning 
to recover by April next year.

Public finances will, however, deteriorate with net borrowing hitting 
£172bn in 2010, representing 11.9pc of GDP.

The CBI's predictions for 2009 were echoed by the influential Ernst & 
Young ITEM Club. But it expected the recovery to take longer, with 
GDP still falling during 2010. Peter Spencer, chief economic advisor 
to the Club, said: "Although one or two positive signs have started 
to appear, we face another 12 to 18 months of serious grief."

House prices will fall 16pc this year and a further 5pc in 2010, it 
predicted.
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2.  Budget 2009: Some thoughts, now over to you, Chancellor
Extracts  [nb as many of these were in agreement I do not quote them 
all  -cs]

Michael Saunders, chief UK economist at Citigroup
The Chancellor may try to disguise it, but the upcoming Budget is 
likely to confirm the major failure of UK fiscal policy over the last 
decade and drive home that serious fiscal pain lies ahead.
It is likely to confirm that the 2008/09 fiscal deficit has surged to 
about £90bn (6.4pc of GDP), and is heading up to about £174bn (12.4pc 
of GDP) in 2009/10. As debt service costs spiral, unemployment soars 
and revenues lag, I expect the deficit to reach about £190bn (13.4pc 
of GDP) in 2010/11. These would be, by a long way, the highest fiscal 
deficits for over 100 years outside the First and Second World Wars. 
Nothing else even comes close.

This alarming fiscal backdrop will dominate the Budget. This is one 
of the rare occasions when the economy badly needs massive near-term 
fiscal stimulus - several percent of GDP for the next year or two - 
aimed at boosting corporate liquidity and protecting jobs while the 
financial system heals.

However, fiscal stimulus on the scale warranted by the economic and 
financial crisis will lift the deficit to 15pc of GDP or so. I doubt 
the Government will risk this, because of the danger such a colossal 
deficit will trigger a fiscal crisis (and possible downgrade?) as 
investors lose faith in the UK's commitment to economic stability, 
further undermining sterling and pushing up gilt yields sharply.

So, when it is most needed, fiscal policy will not be able to act. 
This is a major policy failure. Hence, I expect that the Budget will 
introduce relatively modest measures -help for first time buyers - 
and gimmicks - subsidies for electric cars - that attract headlines 
but have little or no genuine significance for the macro outlook.

George Magnus, senior economic adviser to UBS
The UK economy is set to contract by 4pc in 2009, domestic spending 
will remain in recession in 2010, unemployment will rise to over 3m, 
and the money value of GDP is shrinking for the first time since 
1945. In these circumstances, the 2009 Budget would encompass the 
single-minded pursuit of high-octane infrastructure and public 
purchase projects worth 2pc-3pc of GDP, and the weaning us off credit-
based solutions to the recession, towards those based on employment 
and income.
It isn't going to happen. [- - - - - -]
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FINANCIAL TIMES 20.4.09
1.(LEADER) The folly of hoping for the fiscal best

Never before in peacetime has a chancellor of the exchequer watched 
so deep a fiscal hole open so swiftly before him: annual net UK 
public borrowing is expected to reach £175bn, or 12 per cent of 
national income, over the next two years. As he announces his 
forecasts in his Budget on Wednesday, Alistair Darling will display 
customary sang-froid. Is that all he must do? The answer is: 
absolutely not.

This week's forecasts will be far above the 8 per cent of gross 
domestic product borrowing in 2009-10 and 6.8 per cent in 2010-11 
forecast in the November 2008 pre-Budget report. The Treasury was 
then suggesting that the economy would shrink by a mere 3/4-1.25 per 
cent in 2009, followed by growth of 1.5-2 per cent in 2010. Now, the 
average of independent forecasts is for a decline in GDP of 3.4 per 
cent this year, followed by growth of 0.3 per cent in 2010.

Last November's forecast that public sector net debt would grow from 
41 per cent of gross domestic product to just 56 per cent in 2015-16 
is also as dead as the dodo. Net debt might reach 100 per cent of 
GDP. This crisis would then cost as much as a big war. While not 
unprecedented, such debt would leave the country dangerously 
vulnerable to a loss of confidence.

So what should be done now - when the crisis is still virulent, the 
government is near the end of a parliamentary term, and fiscal 
prospects are so uncertain?

Nobody knows how long the recession will last nor how much of the 
collapse in output or fiscal revenues will prove structural. Yet it 
would be irresponsible to assume that today's deficits are largely 
cyclical. In November, the Treasury estimated that the structural 
borrowing requirement would be 7.2 per cent of GDP this year. To be 
more optimistic than that would be to take a huge risk with fiscal 
solvency. No responsible government would take such a gamble. If it 
found it had been too cautious, it could still cut taxes or raise 
spending. If it took the risk, it might be driven into inflationary 
default.

In normal circumstances, then, the right decision would be to 
announce a multi-year programme of spending cuts and tax increases 
that would eliminate the structural deficit, under conservative 
assumptions, by no later than the end of the next parliamentary term.

  Last November, the chancellor went a part of the way in that 
direction, when he announced the decision to keep net investment 
constant in nominal terms from 2011-12 and slash the growth in real 
current spending to 1.2 per cent a year from 2011-12 to 2013-14. But 
the Institute for Fiscal Studies now says that at least a further 
£40bn (3 per cent of GDP) in tightening - roughly the same as 
announced in November - will be needed if the current budget is to be 
in balance by 2015-16.  [This will require major cuts in spending -cs]

In normal circumstances, fiscal policy should also be tightened 
sharply right now. Yet two valid arguments can be made against this 
notion: first, standard instruments of monetary policy are at the 
limits of effectiveness; second, the government has had little 
difficulty in funding its deficits, with the yield on 10-year 
government conventional bonds down to 3.23 per cent, just 7 basis 
points above the German level. Tightening fiscal policy in this 
situation might deepen the recession, thereby worsening the realised 
fiscal outcome, without improving credibility in any useful way. It 
would be futile masochism.

The point has come, instead, at which, with a general election in the 
offing, the UK must start a national debate on fiscal priorities. The 
country is, in overwhelming likelihood, far poorer than it thought 
only a year ago. It is certainly going to be vastly more fiscally 
indebted than it hoped. Fiscal austerity will be the dominant feature 
of UK politics for a decade.

It was brave of George Osborne, shadow chancellor, to recognise this 
grim truth in his interview with the FT last week. He was right, too, 
to indicate that his party's emphasis will be on curbing public 
spending.

The government must also be honest about the choices it intends to 
make. Its fiscal record is nowhere near good enough for it to be 
given any benefit of the doubt. Yes, no parliament can bind its 
successor. And yes, the chancellor should not slash the deficit right 
now. But he can - and must - indicate how Labour would tackle its 
dire fiscal inheritance, should it retain power.

This week, the chancellor must be judged by the sharpness of the 
picture he presents, by the clarity of the choices he sets out and by 
the honesty with which he explains the government's approach. This 
will involve a long-term programme of austerity on spending and a 
clear indication of how and, under what circumstances, the necessary 
revenue is to be raised. The British people deserve no less: nothing 
short of their national future is at stake.
====================
2.Britain's Budget has no room for big bucks
By Richard Lambert

The steepest decline in economic activity in decades. Accelerating 
unemployment. An alarming fall in tax revenues. The need to borrow 
money on a scale that could all but double the issuance of gilt-edged 
securities in the next four or five years. And the prospect of a 
general election within the next 14 months. Alistair Darling surely 
has the least enviable job in Britain as he prepares to deliver his 
Budget on Wednesday.

Government borrowing in the year just ended may have reached about 
£95bn ($140bn, ?107bn) - roughly £17bn more than anticipated in the 
pre-Budget report last November. In 2009-10, borrowing is likely to 
shoot up much higher - to about 11 per cent of gross domestic product.

That would be the highest figure since the second world war, and well 
above the level for any other leading industrialised country apart 
from the US.

It is true that the total level of public sector debt in the UK 
compares favourably with other big economies, at somewhere around 50 
per cent of national income in 2009-10. But that figure is set to 
rise steeply in the next few years and the government's credibility 
as manager of the public finances has already been severely 
stretched. Its aggressive spending policies since around 2003 have 
produced a structural fiscal deficit that is much higher than the 
euro area average.

So the likelihood is that if the chancellor of the exchequer were to 
have a rush of blood to the head and let things rip on Wednesday, any 
short-term benefits for the economy would be more than offset by the 
real threat of higher borrowing costs and hefty tax increases in the 
years ahead.

That is why the governor of the Bank of England and the CBI 
employers' federation have urged him to stick to "targeted and 
selected measures". He needs to do something to help keep people in 
jobs. It would be sensible to support company cash flow, among other 
things, by plugging the gaps that have appeared in trade credit 
insurance and perhaps by time-limited increases in capital 
allowances. Manufacturing, which has suffered shocking falls in 
output over the past six months, needs some kind of a lifeline - 
nowhere more so than in the automotive sector. But there is no room 
for big bucks.

That being so, the big question for Wednesday is about how candid the 
chancellor will be about the medium-term outlook. He no longer has 
any formal fiscal rules to work from. They were blown out of the 
water by the impact of the recession months ago. Instead, he 
announced last November what he called a temporary operating rule, 
which would have the budget back in balance and debt falling as a 
share of national income "once the global shocks have worked their 
way through the economy in full". The forecast implied that the happy 
day would come in around 2015-16.

But this already looks optimistic. The Institute of Fiscal Studies 
thinks that public sector debt will be up to 73.5 per cent of 
national income and still rising by 2015-16, a figure that could jump 
to more than 80 per cent depending on the ultimate cost of taxpayer 
support for the banking system. That would be more than double the 
maximum imposed under the late and not much lamented fiscal rules.

So what is Mr Darling going to do? Does he think that the projections 
for public spending growth set out in the pre-Budget report  - which 
even then looked very tight - can be shaved back enough to meet the 
"temporary operating rule"? That would imply real cuts in many areas 
of government spending. Or are further tax-raising measures, on top 
of those already trailed in November, going to take the strain? 
According to the IFS, those would amount to an extra £1,250 per family.

What families and companies both do when confronted by this kind of 
dilemma is to think about how to spend better - to maintain and 
improve what they get for their money at a lower cost. It is not the 
case that cuts in the level of spending automatically translate into 
an equivalent reduction in the services that result - and this must 
be especially true after a 10-year period in which total government 
spending has increased by nearly half in real terms.

The UK's public finances are now on an unsustainable path. As it 
climbs up the international league table in terms of the sheer scale 
of its public sector, the time has come for a serious debate about 
the size and role of the state. This should be the battleground for 
the next general election.
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The writer is director-general of the CBI employers' federation
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THE TIMES 20.4.09
Alistair Darling's Budget to demand £15bn cut in public spending
Philip Webster, Political Editor  [A long-time NewLabour 'groupie - 
and it shows! -cs]

Alistair Darling will demand £15 billion in Whitehall efficiency cuts 
this week after repeated warnings that public sector spending is out 
of control.

The Chancellor, who cut the rate of growth in annual spending to 1.2 
per cent last November, will reduce it further in the Budget on 
Wednesday, with massive implications for services in the years after 
2011.

Mr Darling, who tried to boost confidence in the economy last night 
with a video message on YouTube, will also announce a £500 million 
"green stimulus" to the economy.

Tens of millions of pounds will go towards promoting the building of 
wind farms off Britain's coastline. [How CAN he throw money away like 
this on something that DOES NOT WORK? -cs]  The Chancellor is also 
expected to promise that the European Investment Bank will make 
available billions of pounds in loans to support energy projects that 
are threatened by the credit crunch.

Mr Darling acknowledged in his internet message that there had been a 
"huge downturn", but said that the "underlying strengths" of British 
industry would help the nation to take advantage when the global 
economy emerged from recession.

Lord Mandelson, the Business Secretary, said that the Budget would 
"go for growth". George Osborne, the Shadow Chancellor, described 
Wednesday as a "day of reckoning" for the Government.

In his second Budget, Mr Darling will temper his news of future 
spending cuts and tax rises with confidence about the upturn. The 
Times understands that the measures will include:
- £300 million for existing and new council homes to be better 
insulated;
- £200 million to help Britain to make better use of its island 
status by pushing the growth of wind turbines, hydro-electric power 
and other renewable energy technologies;
- A move to kickstart the housing market by offering to underwrite 
£50 billion worth of new mortgage-backed assets to bring the 
securitised home loans market back to life;
- £2 billion to help the jobless. There will be more benefits staff, 
while under-25s who have been jobless for more than a year will be 
guaranteed a job, work experience or training;
- A boost to North Sea oil companies through tax incentives to 
explore old or inaccessible fields;
- A "scrappage" scheme under which motorists would be given an 
incentive of up to £2,000 to buy a new car. The details are far from 
settled even now, but a plan will be included.
[If he does half of  that he would sign the death knell for 
Britain's economy.  NOBODY wiould believe he understands the depth of 
the crisis and as a result the credit rating of the UK would plummet -
cs]

The Treasury has already said it is seeking efficiency savings of £5 
billion by 2011. Mr Darling is expected to say that should be 
extended by a further £10 billion over the following three years. 
There will be huge implications for public-sector jobs as "back 
office" functions are pared back. Only frontline services such as 
education will have budgets protected.

In the YouTube message, Mr Darling said: "I want to make sure that we 
do two things. One is to help people now, through this difficult 
time. But equally importantly we've got to prepare for the future, to 
invest in Britain's future to ensure that we can take advantage of 
the upturn, of the recovery when it comes, and it will come. . . We 
have underlying strengths that we can play to and I want to build on 
those so there are jobs and good prospects for the future."

Mr Osborne said that the Chancellor would be forced to lay bare the 
"economic carnage" of the past decade and urged him to scrap 
"unrealistic" spending plans. "It will be a day of reckoning and I 
think you are going to see the Chancellor forecast the longest 
recession that Britain has had since the Second World War," he told 
the Andrew Marr Show on BBC One.

Vince Cable, the Liberal Democrat Treasury spokesman, urged Mr 
Darling to be honest with the country about the scale of the problem.

However, Lord Mandelson said that he would not let people talk the 
economy down. "Frankly I'm fed up hearing Tory politicians seizing on 
every piece of bad news economically," he said. "What cheers them up 
is to be able to point to and pounce on bad economic 
news."  [Mandelson diesn't care if Britain does go bust.  He has a 
whopping pension in euros from the EU and furthermore he has no 
family and has no stake or care for the future. -cs]