Ken Clarke warns Britain is on the brink of ‘meltdown’
Kenneth Clarke, the former Conservative Chancellor, has warned the
economy is on the brink of “meltdown” and unemployment could reach
By Rupert Neate and Robert Miller
Last Updated: 6:35PM GMT 12 Nov 2008
Mr Clarke, 68, said the British economy is headed for a “catastrophic
crisis” that will be “far worse than anything that has occurred in my
“There will be a very serious recession next year,” he said in an
interview with Telegraph TV. “I think the big problem in 2009 will be
the catastrophic fall in consumer spending demand, spending in shops
will get worse.”
Mr Clarke, who as Chancellor of the Exchequer between 1993 and 1997
led Britain’s recovery from Black Wednesday, called for a temporary
cut in VAT to boost spending.
Speaking as the Office of National Statistics revealed unemployment
has reached an 11-year high of 1.82m, Mr Clarke said the number of
jobless could soon reach three million.
“It is going to go up a long way… whether we will get back to three
million again is one of those slightly morbid questions I really don’t
know the answer to. But it could get pretty big,” he said. Rising
unemployment will have a “devastating effect” on families and lead to
more people being unable to pay their mortgages, he said.
The former Chancellor said Gordon Brown has received undue credit for
his role in attempting to shore up the global economy. “The idea that
Gordon has saved the world is not true,” he said. “We still have a
major, major crisis in this country and… public finances are in a
Mr Clarke said the larger than expected 1.5 percentage point cut in
the base rate was a good move, but cautioned that it would not end the
crisis. “We had a big cut in interest rates, about which there was a
wholly exaggerated expectation, in the short term it will have modest
effects, if any. Long-term it will begin to have effects.
“We are not yet in a state where we can be absolutely certain we are
not going to have something close to meltdown next year”, he said.
“You do have to see what can be done with taxes.”
He cautioned that Britain has “mounting debt, which is unsustainable”
but said policymakers should bear in mind the effect a “full-blown
depression will have on public finances”. Looking forward to the
Pre-Budget Report he said any fiscal stimulus package would have to
work in both the national interest and contribute to worldwide efforts
to stabilise the global economy.
Mr Clarke said the public can see the Prime Minister has got more
“confident” in his economic judgement, but said he imagines the
Treasury is being “driven crazy by the wild way” in which he and his
advisers spark speculation about the way the Government intends to
combat the financial crisis.
According to Mr Clarke, public respect for banks, which are “hated
institutions” at the best of times, has collapsed. He was also “very
concerned” that the Government could make the crisis worse by forcing
banks into “lending that they cannot afford”.
“When I hear these stories of the Chancellor being presumably ordered
by the Prime Minister to get the banks in and waving newspaper
headlines at them I think that is no way of making policy,” he said.