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Is chancellor too optimistic about recovery of the nation?

March 7, 2009 by admin  
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Most people in the UK are now well aware that the UK is going through a very rocky period, with the global financial crisis still taking effect and the recession further impacting on the economy. In fact, over recent months a number of industry experts have warned that the nation needs to prepare itself for a bleak time for the foreseeable future, stating that this could be a long, dark, and worrying period for many consumers and businesses.

However, in a recent report the Chancellor of the Exchequer, Alistair Darling, indicated that in fact the recession and the economic downturn may not be as long lasting and deep as many had thought, and the chancellor even suggested that it could all be over by the middle of this year. However, this suggestion was slated by many industry officials who said that the chancellor was being far too optimistic, and with the country now having seen six consecutive months of negative growth it seems that these officials may be right.

Both Downing Street and even the chancellor himself have since admitted that the prediction recovery this year was an ambitious and overly-optimistic one, and officials from Downing Street said that this was the treasury’s ‘best view’ at the time of the pre-budget report. Despite his earlier optimism the chancellor has now said that the recession could be a long and painful one that lasts for a couple of years, and this is a view that has also been shared by the Business Secretary, Lord Mandelson.

There have been concerns expressed over the views of the Prime Minister, Gordon Brown, the chancellor, and the business secretary, which many officials believe are conflicting, but this is something that has been denied by Downing Street officials. An official spokesperson for the Prime Minister recently stated: ‘The Treasury have to set out their best view, which was their best view at the time of the PBR. It was a view that was very much in line with the view taken by the Bank of England. ‘But they also acknowledge that there is obviously uncertainty around any forecast.’

In fact, far from agreeing with Darling’s initial forecast a survey of analysts showed that many industry experts expected the slump to be longer and more difficult than anticipated, with job losses expected to soar to over three million, and house prices expected to continue falling over the course of the year and into the next. One official at the International Monetary Fund, Barry Potter, has gone on to predict that the economic slowdown in the UK is going to prove a particular problem for the government to deal with over the coming year, and Darling’s forecast also gave opposition party members further cause to slate the Labour party.

The labour party has already been under fire from opposition party members over its bailout of the banking industry last year with £37 billion of taxpayers money as well as over a further bailout planned for this year, which will involve using billions of pounds more from the public purse.

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