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Britain 'will have worst recession'
Paul Waugh, Deputy Political Editor29 Jan 2009
The British economy will contract by 2.8 per cent this year - the worst of any Western country - the International Monetary Fund declared today.
In a huge blow to Gordon Brown, the IMF said that the UK's recession will be deeper than that of the US, Italy, France and others.
It also cut its forecast for global growth this year to 0.5 per cent - the weakest since the Second World War - from a November estimate of 2.2 per cent. The outlook was even worse for advanced countries like the US and the eurozone, whose economies are seen contracting by 1.6 per cent and two per cent respectively.
The IMF said emerging market economies would be the only source of growth, expanding 3.3 per cent this year and five per cent next year.
Meanwhile, Britons are facing a £20billion a year "double whammy" of tax rises and spending cuts to get the public finances back into balance, the Institute of Fiscal Studies said today.
In its annual "Green Budget", the think tank also predicted that it would take until at least 2029 for government debt to return to levels seen before the credit crunch. Regardless of which party wins the next election, it warned, tax increases and spending cuts were inevitable.
The IFS, producing its report with investment bank Morgan Stanley, said the Treasury was over-optimistic about the pace at which Britain would bounce back from the recession.
It said the next government would need fresh tax rises or spending cuts worth an extra £20billion a year by the end of the next parliament, around 2014.
It claimed that the country would need to copy former chancellor Kenneth Clarke's tax-raising Budget of 1993, the last time Britain needed to pull out of a deep downturn.
The IFS estimates the Treasury will have to impose a real freeze on Whitehall spending during the three years of next year's spending review and that tax revenues will not grow as strongly as the Treasury hopes. In 2015-16 the Government will have to borrow 1.5 per cent of national income more than it predicted in last November's pre-Budget report. Public sector debt would soar to above 60 per cent of national income, the report says.
The IFS points out that tight spending and tax rises "would have to remain in place until the early 2030s before debt returns below the ceiling of 40 per cent of national income Mr Brown set as one of his two fiscal rules in 1997".
It also warns "there is a much greater chance of big losses than big profits" for taxpayers from the government interventions to rescue the banks.
Reader views (22)
Seriously, make me prime minster, I know jack about economics and have no real maths skills (bit like our current prime minster and the one before him and the chancellor before that, oh look same person, and the current chancellor) but I can guarantee that I'll make less of a mess than this administration. What was a great nation is now suffering under fools.
- S-M Hearmon, London, UK, 29/01/2009 09:13
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In footling teams, if Gordon Brown had mismanaged his team, say Kirkcaldy United, to the level he has miss managed UK Economy United, I have very strong suspicion that he would have been removed from office a little while ago.
In corporate speak the employee who make a total mess of anything, is never the person who is entrusted to correct and resolve matters.
- J R J, Glen Vine, 29/01/2009 08:52
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GARY FROM AMERSHAM FOR MAYOR, PM, KING .... please read his entry and take note.
- Ben Farrell, London, 29/01/2009 08:49
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“Britain will have worst recession”. This is definitely no surprise. A lot people buried their heads in the sand while we prospered on the back of increasing debt. This government set the example and actively encouraged the situation, and it was always going to end in disaster. Tony Blair is laughing all the way to bank. The timing of his hand over to Crash Gordon was an absolute master stroke (one of the few things he did right.)
This country is a total mess on so many levels (not just economically.) We are desperate for a change. GORDON!!! GIVE US THE CHANCE TO VOTE!!!
- Extremely Worried, UK, 29/01/2009 08:23
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Gary, Amersham all we need now is a politician with some backbone to think like you and weve got it made. GARY for Chancellor!!!!!!!!!!!!!!!!!!!
- Duncan Walker, Lucky to live in Thailand, 29/01/2009 02:15
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An unelected fool living in dreamland,I am heartily sick of hearing his saving the world drivel.He can,t admit any fault and he thinks the public are falling for for this.Wake up McBroon and smell the coffee you and Nulabour are finished as regards the next election,so why don,t you make it easy,call an election now so we can be rid of you and your ilk.
But silly me,bottler springs to mind.
- Roy C, wigan, 28/01/2009 21:01
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heres how to remedy the situation. Firstly - announce complete withdrawal from the EU, stop all payments to EU funds with immediate effect. Let our trade find it's own levels without false subsidies and protectionism. Next - remove all benefits of all types for immigrants - no buts, no exceptions. Forec local councils to get rid of all NON-ESSENTIAL staff - this means 5 a dayers, interpretation and translation, antismoking enforcers, drug counsellors etc. Cut VAT to 10% on all VAT items, cut income tax to 30% for higher earners, and reduce NI to 10%. Give tax breaks for UK Companies, cut fuel duty by 20p @ litre, strat a prison building programme for an extra 20,000 places using UK born builders and tradesmen...close down the DFID, and stop sneding billions in aid to 3rd world countries charity starts at HOME -
- Gary, amersham, 28/01/2009 16:47
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And the pounds gains against the Euro and Dollar on the back of this report. Strange how things happen
- Bruce, London, 28/01/2009 15:59
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We were just thinking of moving back to Britain, as it isn't brilliant here either. But now I'm really confused.
- Margie, Frankfurt, Germany, 28/01/2009 15:56
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Serves all you brits right for trying to claim that London is some sort of Economic powerhouse.
- Cash Money, USA, 28/01/2009 15:50
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Harry, for pities sake, hasn't 12 years of complete and utter carnage at the hands of Blair/Brown seeped into your grey matter yet? We have simply been lied to for over a decade about every single thing. Economy, immigration. welfare, NHS, Police, prisons,armed services,etc. Lies lies and damn lies.
- Roger, Surrey, 28/01/2009 15:27
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Crash Gordon: go away! You are bad and have brought ruin to the country and its families. You really should be going. We hope you understand - you were never properly elected and you never will be!
- Georgie, Islington, London, 28/01/2009 15:13
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Harry, London
Nice one; pity the IMF don't agree with you, but we have to give you 10 out of 10 for trying.
- Morvan, Saulieu, France, 28/01/2009 14:45
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Thank god i have almost £1 million in the bank.Those of you who are skint its back to the drawing board..
- Forbes, barnsley, 28/01/2009 14:10
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NO HARRY/LONDON, you are wrong. Spain, France, Germany, etc all include pension liabilities in their debt levels. The UK does not. Add in UK liabilities for govt employee pensions and PFI as debt and you are double that of the countries you have mentioned. Might as well deal with the facts rather than fool yourself.
- Kr, Florence Italy, 28/01/2009 14:04
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I love the fact that we are forced to accept the argument that our children will suffer because of the supposed effects of global warming, all of which is based on dodgy science.
However, we are now being asked to put our children's financial futures at risk because Gormless Frown has made such a dog's dinner of the economy that we and our kids will be paying to stabilise it for 20 years.
Perhaps we could divert the billions of pounds allocated to the unreal fight against climate change, to the real challenge of preventing the country from going bankrupt?
Or maybe we should follow Iceland's example and take to the streets to rid ourselves of the numbskulls who purport to be in charge...
- Nobby Clark, Perth, the Scottish one, 28/01/2009 12:48
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I have booked a one way ticket out of this hole.
- Ian Makin, Twickenham, 28/01/2009 12:47
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Freeze the MP's pay, make them have to submit their expenses with receipts. Then take a look at the huge pensions that the civil servants receive. Am sure that will save a lot of money!
- Jk, London, 28/01/2009 12:15
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Thank you Crash Gordon from my children and my grand children for making their lives dificult for years to come.
Nobody wants you, call an election so that we can continue our lives without this burden around our necks.
- Stan Jones, Birmingham, 28/01/2009 12:06
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I actually feel sorry for whichever party gets in next. This government has made such a pigs ear of everything and we are all going to suffer for it. Let's start by freezing MPs pensions and annual salary increases and also ensure that none of them are on the fiddle and that they pay income tax on every single penny they earn (using the word 'earn' very loosely). After all it'll be the usual 'working' people that'll get shafted, not the social security spongers. If you can afford to emigrate I'd do so now.
- Sue, Orpington, Kent, 28/01/2009 11:13
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Meanwhile, all the politicians & civil servants will be taking home nice & heavy pension pots! Nice work if you can get it!
- Scott, London, 28/01/2009 10:54
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Sure, but every developed country in the world will be facing a similar problems.
Incredibly we still have lower debt, compared to GDP, than Germany France Spain etc.
The quicker we recover the beeter, the alternative is social division riots and misery.
- Harry, London, 28/01/2009 10:42
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