The Pre-Budget Report seems a long time ago even now. The UK Government promised to spend our way out of recession, pushing annual government debt to 8% next year (EU guidelines are for 3%, crazy says EU's Trichet).
This huge spending boom and a set of interest rate cuts would see of the worst of the recession (and set the stage for a 2009 election?).
Here we are, not quite a month later and the latest economic forecasts have the economy shrinking at 1% or more in Q4 2009. Why is this so bad; well Darling, my beloved badger of a Chancellor, had said growth for the UK would be .75% for 2009. Well, so far it looks like this:
Q1 at .3%
Q2 at 0%
Q3 at -.3%
Q4 at likely -1%.
Add those up (there are some technical issues that mean this does not quite work, but the gist is near enough) and you get to -1.3%.
That is a huge variance to .75%. It is over 200 basis points out. Each of those is a fall in tax revenue and means more borrowing for the Government.
And so, we will see whether the fiscal stimulus works by mid-2009. The issue is that even if it does, the Government's borrowing forecasts are already shot and we will be even more in debt next year that they planned for. Despite this Brown and Darling criticise the Tories for suggesting we live vaguely within our means. Appalling.