Darling: Tough times ahead

By politics.co.uk staff

The UK still has a long way to go before it comes out the other side of the recession, chancellor Alistair Darling has warned.

“It’s going to be difficult. It’s going to be difficult here, it’s going to be difficult in every country in the world,” he told the Financial Times.

“In the current climate nobody, no responsible finance minister, could say that’s the job done. Far from it. We are far from through this.”

He added: “I think this year is going to be difficult. There are going to be some tough calls, there are going to be very difficult decisions.

“It’s going to be very difficult for people. But we must do whatever we can to get through it.”

In the pre-Budget report in late November, the chancellor of the exchequer predicted GDP for 2009 as a whole to contract between 0.75 per cent and 1.25 per cent, with a return to growth in the second half of the year.

However, more recent economic predictions place a far less upbeat tone.

Capital Economics now predicts a 2.5 per cent fall in GDP in 2009 and a further one per cent cut in 2010.

JPMorgan Asset Management predicts a 2.2 per cent fall in GDP over 2009, but with most of the downturn coming in the first half of the year.

“I’m not going to change my forecasts. And forecasts were based on the evidence that we had at the time,” Mr Darling told the FT.

“They were in line with what the Bank of England was saying at the end of November.”

He also played down attacks on his VAT cut, stating while firms were cutting prices in the run-up to Christmas, the VAT cut would run throughout 2009.

Turning to a second wave of bank recapitalisation, the chancellor refused to rule out any further move.

Mr Darling also looked to the US and the new US president.

“We’ve got president elect Obama’s announcement to come hopefully at the end of this month, I hope that that will begin to restore confidence so that we can begin to get through this,” the chancellor told the FT.

Mr Obama is set to bring in a series of tax rebates and tax cuts, as well as an increase in spending to aid the US economy worth as much as $1 trillion (£670 billion).

This week he stated: “The economy is very sick.

“We have to act and act now to break the momentum of this recession.”