According to the Treasury's own compilation of independent forecasts, in October the average prediction was for growth of just 0.9% next year.

Central to the government's plans has been its hope that it can moderate the "boom and bust cycle" of the British economy.

The government's forecast suggests that the current slowdown will be limited to only one year, with growth returning to 2.25%-2.75% in 2000 and 2.75%-3.25% the next year.

But there is more uncertainty about the future of the economy than ever.

The range of independent forecasts has been extraordinarily wide - with investment bank JP Morgan predicting zero growth next year, while Liverpool University was sticking to an optimistic 2.3%.

The world downturn has been quite sharp, with estimated world growth cut by 50% in the last few months, according to the IMF, which predicts that the UK will grow by 1.2% next year.

So no one knows whether the world slowdown will deepen in the following years. Much will depend on action taken by other countries, notably in the USA and Japan.

A severe slowdown will also have consequences for unemployment, which has already stopped falling according to some counting methods.

The most pessimistic forecasts suggest that unemployment could rise by 300,000-500,000 next year, pushing the number of unemployed towards the 2m level again.

Predicting a recession

Predicting a recession is tricky. If you announce that the economy is in recession too early, that might hit confidence and make economic conditions worse.

Leaving it too late, however, as the last government did in 1991, means that the adjustments to fiscal and monetary policy - higher taxes, for example to cover a budget deficit - are more painful.

Until recently, Gordon Brown seemed concerned to play down the risks of an economic slowdown.

As late as September 14, the chancellor told BBC Radio 4's Today programme that growth was "as predicted and in line with our budget forecast."

It was only when the International Monetary Fund was about to publish its forecast for the world economy in October that he admitted his previous forecast was unrealistic.

During the last recession, the government's forecasts were wrong, with an average mean error of 1.6% between 1985-94.

That is why many forecasters believe that surveys of business confidence are important as forward looking indicators of what businessmen are likely to do.

The gloom shown by manufacturers in the recent quarterly survey by the Confederation of British Industry has in the past foretold the severe downturns in 1980 and 1991.

Consequences for public spending

The slowdown in the economy will inevitably put pressure on the government's spending plans.

But the government has said that the dramatic improvement in the current year - by £5bn - in the public finances - has given it plenty of headroom to meet its fiscal rules.

The government will actually repay £1.5bn this year rather than borrowing anything at all.

He predicted that even with the slowdown, public borrowing would only be £1bn higher at £4bn next year (1999-2000).

The Chancellor says he will be sticking to his promises to increase spending by £40bn on health and education during the next three years.

And he says that nevertheless overall government debt would fall as a proportion of GDP to 36.5% by 2002.

That depends on the recession only lasting one year.

If it does not, then the government's fiscal rules could still be breached.

As the Treasury Select Committee pointed out over the summer: "If the economy should slow by more than the Treasury is expecting then inevitably tax receipts will fall and social security spending will increase, putting the Golden Rule at risk."

The Golden Rule is the government's self-imposed limit on borrowing. In the interests of macro-economic stability, it has pledged not to borrow "over the economic cycle" to fund current spending.

The Chancellor still hopes that if the recession gets worse, any increased spending would act as an "automatic stabiliser" providing an extra boost to the economy.

But if there were to be a prolonged recession, then the government could still face a tough decision over increasing taxes - near the time of the next general election - or breaking its spending rules.