With Economic Downturn, Bickering in Britain

LONDON, Nov. 17 -- Britain's leading business organization issued a grim warning on the U.K. economy Monday as the country's political leaders bickered about how frankly they should discuss their economic worries in public.

"The short and shallow recession we had hoped for a matter of months ago is now likely to be deeper and longer-lasting," said John Cridland of the Confederation of British Industry (CBI), which predicted that unemployment could jump to 9 percent with 3 million people out of work by 2010.

Faced with spreading fallout from the global credit crunch, the CBI sharply downgraded its economic predictions. Two months ago, it said the British economy would grow 0.3 percent next year; now it envisions an economic contraction of 1.7 percent.

"Since our last forecast was published in September, the banking system has come under immense strain, sending consumer and business confidence plummeting in its wake," Cridland said in a statement.

The CBI's report followed a similarly bleak assessment by the British Chambers of Commerce, which warned that the British pound could "plummet to dangerous lows" if Prime Minister Gordon Brown's anticipated fiscal stimulus package is not successful.

The economic news spilled into the political arena in recent days when George Osborne, the opposition Conservative Party's top spokesman on economic matters, publicly warned of a possible collapse of the pound.

In an interview Friday in London's Times newspaper, Osborne said Brown's proposed borrowing-and-spending program, perhaps coupled with tax cuts to stimulate the economy, could drive down the value of the pound. The British currency has already lost a quarter of its value against the dollar in the past three months.

"We are in danger, if the government is not careful, of having a proper sterling collapse, a run on the pound," Osborne said, adding that Brown's borrowing might have short-term benefits but could be a "huge burden on the economy" in the long run.

Brown and his Labor Party lieutenants fired back at Osborne, saying his comments were reckless and broke an unwritten understanding that senior politicians should not make public statements that could damage the value of the British currency.

Brown said he expected senior politicians to be "responsible" at a time when people are worried about the economy.

"My job is to tell the British people the truth about the British economy -- the truth that it is the worst-prepared economy in the world for the recession, the truth we've got the highest levels of personal debt in the world, the truth that the pound has fallen by a record amount against other currencies," Osborne responded in a televised interview Sunday.

Many analysts defended Osborne's right to speak his mind in public, but several said he should have chosen his words more carefully.