Alistair Darling has finally admitted the British economy is heading for recession, but insists “we will get through it”.

The chancellor, speaking in an interview with the Independent newspaper, said his government’s determination to use fiscal policy to aid the economy would help rather than hinder the nation’s prospects.

“It is right to let borrowing rise,” he said.

“It is also important that we come back into balance over the medium term. The basic principle is to support the economy now but you have got to make sure you live within your means.”

Mr Darling responded to Conservative accusations the government has failed to adequately prepare for a downturn by pointing out the debt inherited from the Tories had been reduced and that interest rates were at their lowest for decades.

He admitted for the first time Britain faces a recession, saying: “We are going into recession. I remain confident that we will get through it.”

The UK economy shrunk by 0.5 per cent in the third quarter of 2008 and is predicted to perform similarly in the three months to December this year. Two consecutive quarters of negative GDP growth is the technical definition of a recession.

“You should support the economy at the present time,” Mr Darling continued.

“It would be utter madness to start taking money out of the economy at the moment. That would make a difficult position even worse.

“There are two sides to it. It is also important that, like anybody else, you live within your means. You have to demonstrate in the medium term how you propose to do that.”