UK Chancellor 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."