Darling: Give recovery plans time to work

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Chancellor Alistair Darling today urged the public to give his economic policies time to work, as it was confirmed the UK was officially in recession.

And he declined to publicly restate his previous forecast of recovery later this year as City experts predicted output would continue to decline for the whole of 2009.

Official figures showed the economy shrank by 1.5% in the fourth quarter of last year - the biggest fall in more than 28 years and the second consecutive quarter of negative growth.

Asked if that rendered his Pre-Budget Report predictions of positive figures by the third quarter of this year "fantasy", Mr Darling told Sky News: "What we said at the Pre-Budget Report is we did expect there to be a significant downturn in this last period and indeed we have seen that.

"It is undoubtedly sharper than many people believed, partly because you have seen industrial production go down because of course the export markets have been badly affected, particularly by the slowdown in the Far East and the euro area - Germany for example.

"But what is important is that we make sure we have a clear sense of purpose and a determination to do whatever is necessary to get ourselves through this period, whether it is supporting the banking system, getting lending going to people or making sure that we help people and businesses.

"The tax reductions I announced last autumn, bringing forward constructions projects; they are all important if we are going to take action that will help us get through the recovery."

It would take time for Government policies, including this week's multibillion pound second banking sector bailout, to have an effect, he warned.

"Some of these things will take time to feed their way through the economy. But as we have seen with the VAT reduction before Christmas, that's had an effect on bringing down price rises.

"The measures I announced in relation to help bank lending, they will take time to get through."

Recovery was more likely if other countries took action too, he suggested.

"I believe we can get through it all the more so if other countries too - recognising that the problems we face are pretty international - act together then it will be so much better and we will therefore reduce the pain that would otherwise be felt in what undoubtedly will be a difficult time for people."