Page last updated at 22:05 GMT, Wednesday, 28 January 2009

PM attacked on economic forecast

Gordon Brown
Mr Brown is confident his approach is the right one, says his spokesman

Predictions that the recession in the UK will be the worst of all advanced economies show the "true cost of Gordon Brown's failures", say the Tories.

The International Monetary Fund revised its predicted contraction for the UK economy from 1.3% to 2.8% in 2009.

The government says the PM is confident his approach is correct and says there is "uncertainty" in current forecasts.

But Tories and Lib Dems say the figures refute the PM's claim the UK is "well placed" to deal with the recession.

The IMF forecast suggests the UK economy will shrink by 2.8% in 2009 - more than twice as bad as it had predicted and above the 2% average for advanced countries.

'Extraordinarily complacent'

In its update to its November report, it predicted global growth would fall by 0.5% this year - its lowest rate since World War II.

The US would suffer a 1.6% contraction in its economy, Germany 2.5% and Japan 2.6%.

Olivier Blanchard, the IMF's chief economist, told the BBC: "The UK is a financial centre. It did very well when financial centres did well and it is going to do very poorly when financial centres are in trouble."

If Britain is well prepared as he claims, why are we facing the worst recession in the world?
George Osborne
Conservatives

It came as a report from the Institute for Fiscal Studies predicted that the UK's public sector debt would not return to pre-crisis levels for more than 20 years and warned nearly 20bn of tax rises or spending cuts would be needed.

The economy dominated clashes between Conservative leader David Cameron and Gordon Brown at prime minister's questions - before the IMF forecast was released.

Mr Cameron accused the prime minister of appearing "extraordinarily complacent" while Mr Brown said the IFS had predicted a "deep and prolonged recession" would be avoided because of measures already agreed.

'Significant uncertainty'

Responding to the IMF forecasts, shadow chancellor George Osborne said: "This is the day when the British people were confronted with the true cost of Gordon Brown's failures.

"It may be a bad day for him, but sadly it is an even worse day for the country."

He added that he hoped the forecasts were wrong and said: "Gordon Brown cannot answer the simplest question of all: If Britain is well prepared as he claims, why are we facing the worst recession in the world?"

I'm afraid the Conservatives are living in a dream world if they believe that: one, this is purely a British problem; and two, they believe that the answer to it is doing nothing
Gordon Brown

Liberal Democrat Treasury spokesman Vince Cable said: "With a bigger slowdown expected here than in both Europe and America, this report exposes Gordon Brown's lie that Britain is well placed to deal with the recession.

"The prime minister likes to pretend that Britain is simply the victim of a global crisis, but many of the UK's problems are clearly home grown.

"Huge levels of personal debt and an over reliance on the financial sector has made this country particularly vulnerable."

The Treasury said there was "significant uncertainty" in the current economic climate adding: "This is the IMF's third forecast since October last year and only today we've seen a forecast from the IFS with significantly different GDP figures."

The prime minister's spokesman said the report had made clear it was a global economic slump caused by global recession in the financial sector.

"Obviously those countries that are going to be hit particularly hard will be countries with large financial sectors," he said.

But he said the prime minister was "absolutely confident" that the government's recovery plan was "the right approach, the right plan, and it is in line with the approach of every other major economy".

Earlier Mr Brown told MPs: "I'm afraid the Conservatives are living in a dream world if they believe that: one, this is purely a British problem; and two, they believe that the answer to it is doing nothing."



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