Darling’s growing pains

The public face of the Treasury is Alistair Darling. And what a face! Despite the ongoing credit crunch, he’s optimistic about the economy:

Speaking on Radio 4’s Today Programme, Mr Darling said that “there were grounds for optimism” despite the “unprecedented shock to the economy.”

Mr Darling said that the UK still had a “strong economy that had proved remarkably resilient” in the slowdown.

The IMF are pessimistic:

The International Monetary Fund has slashed its UK growth forecast for next year to 1.6 per cent, far below the rate forecast by the government and by private sector economists surveyed by the Treasury.

In explaining its sharply lower growth forecast, the IMF said that the current credit crunch, which began in the US housing market and now threatens other forms of debt, is inevitably spilling over into other economies.

“Risks to the global projections are tilted to the downside, especially those related to the possibliity of a full-blown credit crunch,” it said. It added that this may turn out to be a credit crisis, terming the dislocation which began last August “the largest financial shock since the Great Depression”.

The IMF’s latest World Economic Outlook, published on Wednesday, shows a UK growth forecast for 2008 of 1.6 per cent – 0.2 percentage points below its earlier forecast in January – and the 2009 forecast is 0.8 percentage points made at that time. Although it has downgraded growth forecasts around the world in the past three months, the downgraded forecast for Britain is slightly larger than the 0.7 percentage point that the IMF has shaved off its Eurozone growth forecast for 2009.

As Prime Minister, Gordon Brown is the public face of the government. And what a government! Let’s not talk about the face…

Brown used to be the Chancellor (you know, the public face of the Treasury) and he thinks the problems in the housing market aren’t all that bad.

It’s all, in his word, “containable”.

But last week’s IMF “bad news bulletin” revealed

estimates that house prices are more than 30 per cent above their fair value in […] the United Kingdom

And containing this will be painful, as the Lib Dems have been pointing out…

Sixty thousand homes in the UK are at high risk of repossession, according to analysis by the Liberal Democrats.

The study focuses on home owners that are spending 75% of their disposable income on mortgage repayments.

The number of households involved is double the amount that had their homes repossessed last year, it claims.

Brown’s not pushing the whole thing about the crisis “spilling over” into other parts of the economy, either. He can’t come out and say what’s obvious – that’d make things worse.

Factory output is unexpectedly up, but the falling pound will hit demand from overseas. Still, it proves that the productive economy is faring well even amidst a crisis – which might give policy-makers pause for thought.

Things can only get worse, as they didn’t say in the nineties. And they’ll get worse for working people, not those at the top.



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