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Britain is facing its worst financial crisis in more than a century, surpassing the Great Depression of the 1930s, says one of Gordon Brown's most senior ministers and confidants.
In an extraordinary admission about the severity of the economic downturn, Ed Balls even predicted that its effects would still be felt 15 years from now. The Schools Secretary's comments carry added weight because he is a former chief economic adviser to the Treasury and regarded as one of the Prime Minister's closest allies.
Balls said yesterday: "The reality is that this is becoming the most serious global recession for, I'm sure, over 100 years, as it will turn out."
He warned that events worldwide were moving at a "speed, pace and ferocity which none of us have seen before" and banks were losing cash on a "scale that nobody believed possible".
The minister stunned his audience at a Labour conference in Yorkshire, and Cabinet colleagues, by forecasting that times could be tougher than in the depression of the 1930s when male unemployment in some British cities reached 70 per cent. He also appeared to hint that the recession could play into the hands of the far right.
"The economy is going to define our politics in this region and in Britain in the next year, the next five years, the next 10 and even the next 15 years," Balls said. "These are seismic events that are going to change the political landscape. I think this is a financial crisis more extreme and more serious than that of the 1930s and we all remember how the politics of that era were shaped by the economy."
Philip Hammond, the shadow chief secretary to the Treasury, said Balls' predictions were "a staggering and very worrying admission from a Cabinet minister and Gordon Brown's closest ally in the Treasury over the past 10 years".
Unemployment figures out today are expected to show the number of people out of work has passed two million. The Bank of England's quarterly inflation report will also be released today and is expected to include a gloomy forecast for economic growth.
Yesterday, the Financial Services Authority warned that the recession "may be deeper and more prolonged than expected", adding that the global financial system had "suffered its greatest crisis in more than 70 years".
- INDEPENDENT
