For those of us who believe that the only thing that links "Treasury" and "truth" are their first two letters, Alistair Darling's sudden attack of candour is refreshing indeed.
When he says that the economic times we are facing are "arguably the worst they've been in 60 years", he is at least trying to be straight with us, though I note he still dare not utter the R-word – recession.
What a pity, as well, that he should have taken so long to adopt this personal philosophy of glasnost, and that his grip on economic history is a little beta-minus. I know the poor fellow might feel as thought he can't win on this one, but the Government is now in danger of exaggerating the mess we're in. A run of 60 years is a deep perspective, encompassing three awful slumps. Then again, maybe Mr Darling knows something the rest of us don't.
In truth, it was only a matter of time before Mr Darling would have had to change his tune. In his Budget speech in March he was still telling us that "Britain is better placed than other economies to withstand the slowdown in the global economy". Hubristically, he predicted growth of 2.5 per cent for 2009 – a figure that looked optimistic then, and ludicrous now.
Formally, Mr Darling will have to revise that sharply down in the Pre-Budget Report in October, but there's nothing to stop him gently rubbishing it before then, as we see. Mervyn King, the Governor of the Bank of England, already has, warning of a "difficult and painful year", with output "broadly flat", a euphemism for recession. After all, the economy did not grow between April and June.
The reason why Mr Darling had to predict such bullish growth next year – and even higher numbers subsequently – is simple: it was the only way he could get the public finances to add up. The Government's "fiscal rules" on borrowing are linked to the size of the economy. So, the more growth in the economy you assume, the more chance you have of limbo dancing your way under those self- imposed rules.
But what's that, Mr Darling? The worst prospects in 60 years? Even "arguably", that really is terrifying. Even the most pessimistic independent forecasters don't see the economy in 2009 contracting by more than say 0.25 per cent. The worst years for growth since 1948 (when the economy shrank), were: 1991 (-1.5 per cent); 1980 and 1981 (-2.2 per cent and -1.3 per cent); and 1974 and 1975 (-1.7 per cent and -0.6 per cent). Few expect things to be quite as bad now: does Mr Darling?
Current inflation, at 5 per cent or so, is not a patch on August 1975's record of 26.9 per cent. In terms of the financial system, the last time the banks were unable to provide credit to the wider economy on any scale was during the secondary banking crisis of 1973-74, a short-lived and minor affair, compared with our $1 trillion global meltdown.
Then again, Mr Darling could be thinking of the Depression of 1930 to 1932, the last global credit crunch. Then the UK's economy declined by 15 per cent, many banks collapsed and the world was left with Hitler and the road to Armageddon. Surely Mr Darling can't be that gloomy?Reuse content