The Tories tried to make political capital out of the International Monetary Fund’s latest growth forecasts in today’s PMQs. You can see them on page 2 of this pdf. What’s so significant about them? Well, they’re pretty gloomy for starters – they put the UK’s economic growth at only 1.0 percent for 2008, and -0.1 percent for 2009. And they’re also the most signficant growth predictions made since the financial crisis really blew up a few weeks ago, meaning they’re more likely than most to account for just how bad things are. Indeed, the 2008 figure is down by 0.8 percent on the forecast made in the IMF’s last World Economic Outlook document; the 2009 figure down by a hefty 1.8 percent. That latter readjustment is the biggest negative change among any of the “advanced economies” – so much for Brown’s claim that we’re better-placed than other countries to withstand the credit crunch.
But the Tories’ main complaint was the disparity between the IMF’s forecasts and those put out by the Treasury. HMT’s forecasts in Budget 2008 are for growth of between 1.75 and 2.25 percent in 2008, and between 2.25 and 2.75 percent in 2009. If these are are too optimistic – as they seem to be – then it means that other Treasury forecasts, such as tax revenues, are probably too optimistic as well. In other words, the public finances could be in far worse shape than government is accounting for. Of course, this is an extremely important point – but it’s one that I think the Tories are premature in making. After all, Darling can just rebut the accusation with the line “Wait for our new forecasts in the next Pre-Budget Report” – much as he did earlier today. Those forecasts will be released in a few weeks. Watch this space.
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