ECONOMY: The growth that simply vanished - and now Labour will drive national debt to more than £1trillion



The national debt will surge to record highs of 57 per cent of national income by 2012-13

Alistair Darling was forced to announce the biggest downgrades to Treasury growth estimates on record.

The Chancellor admitted in his speech

that forecasts given in his March budget

were hopelessly optimistic given the scale of Britain’s economic collapse.

While the Treasury was hoping to see

growth of up to 2.75 per cent next year, it

now admits the economy could contract

by up to 1.25 per cent.

The admission represents an historic U-turn by the Treasury.

Observers were equally stunned by the

scale of the recovery Mr Darling expects

after 2009.

He predicted economic expansion in

2010 will be more than twice the pace

expected this year.

And by 2011 the economy could be

growing at 3.25 per cent – its fastest clip

in 11 years.

The Chancellor said: ‘Because of the

wide ranging measures I am announcing today and the many strengths of the British economy, I am confident that the slowdown will be shallower and shorter than would have been the case.

‘I am also confident that the UK, as an adaptable and open economy, will be well

positioned to benefit from a return to growth in the world economy.’

The growth spurt will supposedly be driven by Labour’s £20billion of short term

tax cuts.

In addition, the Treasury is hoping that banks will start lending again as it takes

additional steps to alleviate the credit drought.

And Mr Darling claims the world economy is set to rebound sharply in the early part of the next decade.

Analysts, however, said these predictions may well prove far-fetched.





That is partly because the Treasury is introducing a welter of tax hikes which will take over £12billion out of the pockets of firms and families between 2010 and 2012 alone. This will act as a hindrance to growth.

Mr Darling’s heady recovery assumptions also presume that bank lending will return to ‘business as usual’ levels quickly.

And they rely on a huge boost to exports thanks to strong demand overseas.

Yet abroad, the economic news is getting steadily worse, not better.

In America, where the economy has been struggling for at least a year longer than ours, house prices fell by the most ever in October, figures showed on Monday.

And in Germany, our second-biggest export market after the U.S., business confidence slumped to its lowest in 16 years last month.

At the time of the Budget Mr Darling was criticised for being too optimistic.

Chancellor

On Monday the fear in the City was that even the new growth predictions in the Pre-Budget Report will prove too rosy.

Economist James Knightley of ING bank said: ‘We have serious doubts (about Darling’s forecasts) given that the recession is likely to be nastier than is assumed in these forecasts.

‘We see the economy performing far more poorly in 2009 and 2010, with the economy contracting 1.7 per cent in 2009 and then recording only one per centgrowth in 2010 at best.’



£1TRN IN DEBT WITHIN FIVE YEARS

Labour will drive national debt to more than £1trillion within five years as a result of Mr Darling’s Pre-Budget measures.

That is more than £40,000 for every household in the country.

Next year alone the Chancellor will borrow an extraordinary £4,720 for every household as he throws out Gordon Brown’s so-called self-imposed ‘golden rules’.

That is 8 per cent of national income, the highest level since modern records began in 1970.

As recently as March the deficit was expected to be a mere 2.6 per cent.

Mr Darling’s forecasts show that net borrowing will grow by an extraordinary £512billion between this year and 2014.

By 2013-14, the national debt will have ballooned to £1.1trillion. Britain has never seen such extraordinary figures.

By 2012-13 it will represent a record 57 per cent of national income.

By pushing public debt above 50 per cent Mr Darling will take the Government’s liabilities to levels seen in major continental European economies.

This breaches the fiscal rule introduced by Gordon Brown requiring public debt to be kept below 40 per cent of national income.