If we thought things were bad over here in the U.S., at least we might be able to take some comfort in the fact it is looking as bad or worse in the U.K. Alistair Darlings just released the 2009 budget for the U.K., and while it does not look pretty, the IMF thinks he is being way too optimistic in his projects. From the looks of things the U.K. is going to be adding an incredible amount of debt to their already enormous deficit, and growth is unlikely to come for a few more years. For more on this, read the following blog post from Tim Iacono.
The new U.K. budget announced a short time ago is being greeted with boos and catcalls as taxes are being raised and debts continue to mount - they sound a bit like the state of California with the important distinction that the Golden State doesn't own a printing press.
This report in the Telegraph provides the details:
Alistair Darling has pledged to hit Britain’s richest workers and savers with a smattering of new taxes to help support the UK through its worst recession since the 1930s.It seems that almost every developed nation in the world is now in the process of turning Japanese in that national debt relative to GDP is rapidly approaching parity. In the U.S., we'll reach that point before you know it.
In what is likely to go down in history as the most downbeat and depressed Budget in peacetime history, the Chancellor pledged to raise the income tax rate for those earning over £150,000 to 50pc, hearkening back to the high tax rates imposed by Governments in the 1960s and 1970s.
He also confirmed that the Government will be forced to borrow £175bn this year and £173bn the next, and would have to increase the size of the national debt from recent levels of below 40pc to almost 80pc within the next five years.
There's a complete summary of the new U.K. budget here.
If this video clip is any indication, it's getting a bit testy across the pond.
Darling has already downgraded his economic forecasts from just a few months ago which, as is the case for nearly all government projections, were overly optimistic for 2009. He now pegs economic growth at minus 3.5 percent this year with a rosier outlook for 2010.
In something of an embarrassment for U.K. government economists, the IMF cast a bit of cold water on their updated forecast for next year, predicting another period of contraction according to this report in the Guardian.
Britain will be stuck in recession for another year as consumers reeling from the housing crash cut back their spending, the International Monetary Fund warns today – undermining Alistair Darling's budget claim that growth will resume at the end of the year.Somehow, given the way things have deteriorated over the last six months, it wouldn't be surprising to see even the IMF forecast prove to be too optimistic.
In its twice-yearly World Economic Outlook, the IMF predicts that recession in the UK will be "quite severe", with the economy shrinking by 4.1% this year, and continuing to contract, by 0.4%, in 2010. In the budget, Darling forecast 1.25% growth in 2010.
This post can also be viewed on themessthatgreenspanmade.blogspot.com.