MercoPress. South Atlantic News Agency

UK crucial budget battle anticipated for next Wednesday

A day of reckoning for Alistair Darling

British Chancellor of the Exchequer Alistair Darling is attempting to boost confidence in the UK economy ahead of Wednesday's crucial Budget statement, despite claims the UK faces the longest recession since the Second World War.

As he worked out the final details of his tax and spending plans, Mr Darling acknowledged there had been a “huge downturn” but insisted the “underlying strengths” of British industry would help the nation take advantage when the global economy emerged from recession.

But Mr Darling's optimism was in marked contrast to shadow Chancellor George Osborne's prediction that the financial update would be a “day of reckoning” for Labour. Mr Osborne predicted the Treasury would forecast the longest recession since 1945 with Mr Darling forced to lay bare the “economic carnage” of the past decade.

In a YouTube video message, Mr Darling said: “I want to make sure that we do two things. One is to help people now, through this difficult time. But equally importantly, we've got to prepare for the future, to invest in Britain's future to ensure that we can take advantage of the upturn, of the recovery when it comes, and it will come.

”I'm confident about that because I think we have underlying strengths that we can play to and I want to build on those so there are jobs and good prospects for the future.“

Mr Osborne said Wednesday's Commons set piece would be a ”dramatic moment“ and urged Mr Darling to scrap the Government's ”unrealistic“ future spending plans.

”It will be a day of reckoning and I think you are going to see the Chancellor forecast the longest recession that Britain has had since the Second World War,“ he told the Andrew Marr Show on BBC1. ”We are already (seeing) the fastest rise in unemployment on record and I think we will see the worst public finances not just in the world but also since the Second World War.

“So it is a truly dramatic moment when the economic carnage of the last 10 years is laid bare.”

Mr Osborne said that it would be premature to talk of the “green shoots” of economic recovery already, with unemployment still rising and more companies struggling to stay afloat.

However a renowned UK economic think tank said the economy is no longer in free fall and a recovery next spring is likely. Stabilising markets and the easing of credit conditions may well mean that the worst of the recession is over, the Ernst & Young Item Club said.

The think tank forecasts the economy to shrink by 3.5% this year and by 0.1% in 2010. But it also said that the backdrop to Wednesday's Budget is “bleak” and warned that the chancellor has “limited options” in his spending plans.