Now Bank joins the attack on 'too optimistic' Darling

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Now Bank joins the attack on 'too optimistic' Darling

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Now Bank joins the attack on 'too optimistic' Darling


By Daily Mail Reporter
Last updated at 12:12 AM on 11th May 2009

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Credibility: Alistair Darling predicted the economy would shrink by 3.5 per cent, a figures set to be contradicted by the Bank of England


The Bank of England is this week expected to issue figures contradicting Alistair Darling's economic forecasts.
In the latest blow to the Chancellor's credibility, the Bank is likely to predict that the economy will shrink significantly faster this year than he claimed in last month's Budget.
Less than three weeks ago, Mr Darling said the Treasury expected output to shrink by 3.5 per cent this year.
But the Bank's quarterly inflation report, to be published on Wednesday, will say that he is being too optimistic.
The challenge to Mr Darling's forecast is likely to aggravate relations with 11 Downing Street.
The Bank's Governor Mervyn King has already clashed publicly with the Treasury.
He said the size of the Government's deficit means it has run out of room for further fiscal stimulus by boosting spending or cutting taxes.
The Chancellor's credibility had already suffered a blow with the publication of figures just two days after the Budget.
They showed the economy shrank by 1.9 per cent in the first quarter of the year - a far steeper decline than had been expected and giving a six-month fall that was the worst since records began 60 years ago.
Last week, the Bank announced that it was pumping a further £50billion into the economy through its programme of ' quantitative easing'.
It is understood that the move was prompted by fears that there could be a further downward lurch in the global financial system and that the credit crunch is far from over.



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Although the Bank thinks the Chancellor's forecasts for 2009 are too optimistic, it is expected to predict that the economy will begin to recover before the end of the year.
The Government's official line is that growth will resume within the next six months. The economy will rebound by 1.25 per cent in 2010, according to the Treasury, and a further 3.5 per cent in 2011.
The Treasury is pinning its hopes of tackling Britain's huge budget deficit on strong growth from 2011 onwards.
Business leaders remain pessimistic about short-term recovery hopes. Richard Lambert, of the Confederation of British Industry, warned last week that 'the credit markets are still not working properly'.
And a survey today from the British Retail Consortium says consumer confidence has dived over the past six months.
It shows confidence at its lowest since the survey was started in 2004.
The fall in confidence is linked to job worries. More than 86 per cent of those polled said they felt 'negatively' about their job prospects over the coming year.
However, some independent economists believe there are now signs that the recession is coming to an end.
George Buckley, of Deutsche Bank, said the economy could start growing as early as next month. And investors' increasing conviction that the worst may be over has driven share prices up by an average 28 per cent since its low in early March.