It\’s a sign of what Brown did:
The blow to tax revenues from the credit crunch is set to send the Chancellor plunging £16 billion or more deeper into the red over the next two years than he has planned, calculations for The Times indicate today.
The estimates of the toll on tax receipts by the National Institute of Economic and Social Research will aggravate the acute financial headache already facing Alistair Darling.
With a general election expected as soon as next year, the Chancellor is already boxed in. A still deeper slide into the red would leave him with little scope for pre-election giveaways or for extra tax and spending measures to help to stave off a recession.
The institute calculates that the severe economic and financial impact of the credit crunch will mean that the Chancellor has to borrow an extra £8 billion in the present financial year, 2008-09, and another £8 billion extra in 2009-10. The £16 billion total is the equivalent of adding nearly 4p to the basic rate of income tax.
The institute also sounded a warning that in a worst-case scenario, should the credit crunch intensify, the extra borrowing needed could double again, to £32 billion over two years. That would inflict on Mr Darling a deficit for this year of £59 billion, or 4 per cent of GDP.
After 15 years of a growing economy, the budget really ought to be in surplus, so as to provide room for an expansion of the deficit when the inevitable return of the business cycle happens.
He\’s spent it all though and looking at the difficulty he\’s having in restraining public sector wage rises, he ain\’t going to be able to get out of this easily.
If we actually have a recession, rather than just a slow down, I really wouldn\’t be surprised to see the PSBR going to 10% of GDP.