Darling stands firm on 'extraordinary' Budget

Alistair Darling denied today that he had been overoptimistic to predict in his Budget that the British economy would pull out of recession by the end of the year.

Mr Darling has been flatly contradicted by the International Monetary Fund (IMF) and faced a barrage of criticism from financial analysts, business leaders and other political parties since revealing his growth predictions for the UK economy.

The Chancellor said yesterday that GDP would shrink by 3.5 per cent this year — the worst contraction since 1946 — but would grow by 1.25 per cent during 2010.

The prediction enabled him to make calculations about public spending that will prove unsustainable if the economy perfoms worse than he forecasts.

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"I remain confident that the economy will start to grow before the end of the year," Mr Darling insisted in defending his "extraordinary actions" this morning.

Challenged that most people disagreed, he went on: "There are a wide range of forecasts. There’s a lot of uncertainty around at the present time but I believe the action we have taken now, the money we’ve put into the economy over the past few months, together with action other countries are taking ... that will have an effect."

The IMF predicts that the UK will remain in recession during 2010, when it expects GDP to shrink by 0.4 per cent, and that the downturn over this year will be worse than the Chancellor's prediction, with the economy set to contract by 4.1 per cent.

The Budget also revealed the perilous state of the country's finances, with net debt forecast to hit a stunning 79 per cent of GDP, at £1.4 trillion, in 2013-14.

George Osborne, the Shadow Chancellor, said that Mr Darling and Gordon Brown were refusing to face the extent of the financial crisis they had created, offering instead only a few eye-catching and populist measures that did little to tackle the country's unprecedented levels of public debt.

"The job of a Chancellor in a deep economic recession like this, with very serious public finance problems, is to exude confidence, to show there’s a serious plan to deal with the problems," Mr Osborne said on BBC Radio 4's Today programme.

"We didn’t get that from the Chancellor. Things like the 50 per cent tax rate, you know, in the end he tried to persuade people that he could solve all the problems that have mounted up over this decade of debt with a new 50 per cent tax rate on people earning over £150,000 and I think the country has seen through that.

"They know there are serious problems and they know there are not serious answers from this Government." link...