Darling growth prediction blown out of the water

Less than a year ago, Chancellor Alistair Darling was predicting a return to growth in the second half of this year in his Pre-Budget Report.

He forecasted falling output for the first two quarters of this year, but said he then expected the economy "to start to recover" thanks to stimulus measures such as his temporary VAT cut.

Mr Darling's prediction - along with those of many experts - have been blown out of the water by the extent of the recession, which has been far from the "shorter and shallower" downturn first envisaged.

By April's Budget, the Chancellor was expecting growth to return "towards the end of the year" and now the spotlight will be on the latest round of forecasts in next month's Pre-Budget Report.

If the current 3.5 per cent contraction for the economy this year is revised lower in November, it will reverberate across the entire public finances.

The current record £175 billion in net borrowing is likely to rise as tax receipts fall short of predictions and estimated benefit payments increase, heaping more pressure on the public purse.

The 1.25 per cent growth also predicted for next year and much stronger 3.5 per cent advance pencilled in for 2011 will also come under extreme pressure - meaning that the Government will have to borrow more for longer and making attempts to tackle the country's structural deficit that much harder.

Mr Darling currently forecasts growth "at the turn of the year" - a form of words open to wide interpretation which gives him room to manoeuvre should the economy continue to flounder.

As the first Chancellor since Norman Lamont to oversee a recession, he is sticking to his guns on Government support for the economy to prevent an even deeper slump - but will be desperately hoping the recovery begins sooner rather than later.

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