Darling Admits He Badly Underestimated the Recession

In an interview in the Times Alistair Darling has said that he badly underestimated the depth and severity of this recession in his pre-budget report, and that his forecasts would need to be torn up.

Darling will predict a 3% decline in Britain's economy in his 2009 budget, more than twice the 0.75% - 1.25% he forecast in his pre-budget report. The economy has not receded by 3% in any 1 year since WWII, though Thatcher came close with a 2.1% drop in 1980.

None the less Darling predicts that economic growth will be back into the black by the end of this year.

Darling's sudden wave of realism comes at a strange time; following the G20 summit in London, which some had hoped would herald a turnaround in the global economy.

Hopes, which the Times said were fuelled by the Nationwide reporting a rise in UK house prices for March, and "a series of indicators in Britain and other countries which some economists interpreted as the "green shoots" of recovery.

Darling however cautioned against jumping the gun based on such indicators:

"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," he said.

Our Liam Bailey commented on the revised forecast by the Chancellor:

"About time," he said, "I know I'm not the only person who laughed at Darling's earlier forecast," he added.

Bailey continued: "Mind you, I felt the same about the economists who thought the G20 summit would lead to a miraculous recovery, though I concur with Darling that it will help."

"The only thing that will bring a recovery in this global recession is time, government investment and a joint approach. Hopefully the G20 summit will prove to be a big help in the latter two, but not sufficiently to reduce the need for the first," Bailey finished.

The G20 summit caused Labour's popularity in the polls to increase by three percentage points to 34%, cutting the Tories lead to just 7%, the lowest since December, with no change in the Tories percentage.

It is likely that Darling's statements today, by reminding people just how wrong he was in the first place, will see that rise in popularity reversed -- especially when the Tories pounce on it to strengthening their claims that Labour has lost control of the economy.