Fraser Nelson

Darling’s less optimistic forecast

Darling's less optimistic forecast
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Good old Alistair Darling is on manouevres again. Normally, Chancellors stay quiet before the Budget but he has admitted to the Sunday Times that there will not (surprise, surprise) be an economic recovery starting in July as he predicted last October. "We must be realistic about this," he says. "I think it will be the back end, turn of the year time, before we start seeing growth here.” I can't remember another time that a Chancellor told a newspaper his new forecast weeks before he told Parliament. The Sunday Times confidently states that the Budget will show a 3% fall in GDP

When Darling says "You must not build up any false hope," I wonder who he has in mind? Certain dour Scotsmen who have been going around saying that the G20 illusion will speed the global recovery? He sees no green shoots - and downplays the Nationwide 'house price recovery' as a blip. “I would say with any figures that come out, you want to be pretty careful about one set of numbers, no matter what they show.”

What I find refreshing listening to Darling is the absence of the Brown-type bluster: his words are not studded with attempts at self-exculpation or coded jibes at the Tories, unlike Brown.  It's almost as if he seems to believe that, as Chancellor in a recession, he has a duty to level with the British public about the true state of the economy. Since 1997, this has been a fairly revolutionary position. Perhaps most tellingly, when asked of the worst is over, he says "I think there is some way to go yet."

He's not wrong there. Look at the below graph, from Citi, the trajectories of past recessions (ie, the cumulative change in GDP) from 1973. Sure, they take different shapes but the dotted line is Citi's best guess for the trajectory of this one (with progress so far in solid) line. The number on the bottom is quarters. My reading of this is that GDP doesn't recover until eight quarters - ie, that's two years of declining or stagnating GDP. By some definitions, two years of recession is a depression. Anyway, next time someone tells you about green shoots of recovery, remember this graph and how little progress we have made so far. Darling's right. There is some way to go yet.

Written byFraser Nelson

Fraser Nelson is the editor of The Spectator. He is also a columnist with The Daily Telegraph, a member of the advisory board of the Centre for Social Justice and the Centre for Policy Studies.

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