Just as I was saying the other day, the true severity of this "recession" is yet to be revealed.
THE chancellor, Alistair Darling, has admitted that he and his Treasury officials got it wrong over the length and severity of the recession and that he will be forced to tear up his economic predictions.
Sorry, but this is downright deceit. Darling was warning sometime ago that this was going to be the worst economic situation for 60 years or more, but then seemed to backtrack and hint that this will be no worse than the recession of the early nineties. Clearly it is much worse than that.
He will slash his growth forecast in the budget and warn that there will be no economic recovery until the end of the year, dashing hopes that last week’s G20 summit will be followed by an early upturn. “ It's worse than we thought,” Darling said this weekend.
As I said yesterday, the true test of the "success" of the G20 stitch up - I mean summit - will be what Darling delivers in his budget. By all accounts it won't even be as "steady as she goes" budget, but an "all hands to the pumps" budget instead. The idea that Darling will "slash his growth forecast" is a little fanciful as there will be no growth - just a sharp contraction of the economy.
Nor will there be an economic recovery at the end of the year - well, not this year, anyway.
In his April 22 budget, the chancellor will predict that the economy will slide by at least 3% this year, its worst single-year performance since the second world war and three times the rate of decline that he forecast in November in his prebudget report.
Think of a number then triple it. A 3% contraction? You'll be lucky sunshine.
The weaker growth forecast will mean public borrowing in the coming fiscal year will be well above the £118 billion level that Darling had predicted six months ago, renewing fears about the sustainability of public finances. Independent economists say borrowing could hit £150 billion or more.
My bet would be on "or more".
The economy’s dive over the past six months had been steeper than the Treasury had expected, he said, making it inevitable that he would be forced to revise his forecast significantly. Britain’s gross domestic product slid by 1.6% in the final three months of last year, its biggest drop since the recession of the early 1980s.
A drop of 1.6% per quarter equates to a yearly contraction of 6.4%, but the Chancellor is expected to predict just a 3% decline? Based on what? Tea leaves? If anything it is going to accelerate, not slow down - if it's not pushing a 10% contraction by the fourth quarter I will be amazed .... or the government will be fiddling the figures (not for the first time).
The economy’s biggest single-year fall in the postwar period was in 1980, when it shrank by 2.1% under Margaret Thatcher, followed by a further 1.3% decline in 1981.
I for one remember just how bad that recession was, but compared to what we're going to go through those early eighties years will seem like times of plenty. The difference this time is that, unlike Thatcher, Brown and Darling have no "plan" for recovery or what comes after the recession - just a faint hope that pouring money into the same old systems that got us into this state in the first place will resolve it.
How about the Tories? They don't have a plan either - the only difference is that they'd pour the money down the pan a little more slowly, but only a little.
Face it - if the Chancellor is preparing the ground now for what is looking to be a very austere budget - a budget that is likely to be the last significant chance the government have to bribe the electorate before the next election - then things aren't just much worse than they thought - they are much worse than they are letting on.