Economy may need a second cash boost

Ministers admit the recession may last longer than they predicted last November

Ministers admit the Government may need a second fiscal stimulus to keep the economy moving because the recession will last longer than the Treasury predicted.

Alistair Darling, the Chancellor, may extend the £20bn stimulus he announced only six weeks ago when he delivers his Budget in March or April. There are also growing signs he will revise his November forecast that the economy will start to grow again from this summer.

The Government is also considering whether to "print money" if interest rates continue to fall, which would be used to buy assets so that the extra cash would filter through to businesses and families. Today the Bank of England is expected to announce another cut in the base rate, from its current level of 2 per cent.

A second fiscal boost and a longer recession may force the Chancellor to raise the £118bn public borrowing figure for the 2009-10 financial year that he announced in his pre-Budget report. Last night, the Tories warned borrowing could be £18bn higher than forecast in 2009-10, and £50bn higher than planned the following financial year.

One senior minister told The Independent yesterday: "November was a snapshot. The picture now is worse than it looked then. It's changing fast. This is going to be a difficult year and we may need to do more to help the country through it."

After a three-day tour of Britain which began yesterday, Gordon Brown will turn his attention to the global economy to ensure a co-ordinated fiscal boost by as many countries as possible. Finance ministers from 20 leading nations will meet in March, ahead of a summit of world leaders, including Barack Obama, in London in April.

In a speech in Manchester today, the Business Secretary, Lord Mandelson, will say that the Government will "learn from our own and other countries' response to the international economic crisis and make adjustments as necessary".

Lord Mandelson will argue: "When private-sector demand falls this sharply, the only pockets deep enough to make any difference belong to government."

The Government will not repeat the mistakes of previous recessions, when "retrenchment" allowed short-term unemployment to become long-term, he will say.

Ministers pointed out that the £20bn boost announced by Mr Darling in November was less than its proportion of 2 per cent of global GDP (£800bn) recommended by the International Monetary Fund. In Britain, that would be about £30bn, leaving the Chancellor with another £10bn of leeway. The Opposition points out that the IMF also described the level of Britain's debt as "disturbing".

On a visit to the East Midlands, Mr Brown announced the creation of an extra 35,000 apprenticeships at a cost of £140m. The Cabinet will meet in Liverpool today.

The Tories seized on an admission by the Chancellor yesterday that he may have to revise his growth forecasts. George Osborne, the shadow Chancellor, said: "It appears that Alistair Darling is already trying to wriggle out of the economic forecasts he made just weeks ago which, as we pointed out at the time, were more optimistic than most commentators believed. It's an admission that he sees what the country sees: Labour's policies for the recession are not working."