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Oliver Hardy famously said to Stan Laurel: "That's another fine mess you've gotten us into." Fast forward 75 years and Chancellor Alistair Darling could be forgiven for thinking the same. Indeed, the economic straightjacket he now finds himself in - largely due to the public spending excesses of his boss in recent years - is one that he'll find difficult to extricate himself from in the short to medium term.
True, the economic problems now engulfing the Chancellor aren't entirely of the Prime Minister's making, given the global credit crunch. But Mr. Brown, when Chancellor, did have ten opportunities to get his economic strategy right. Mr. Darling, meanwhile, rose to deliver his first Budget (written by his boss?) acutely aware that he, along with Mr. Brown, the Bank of England and the Financial Services Authority, had - barely 6 months previously - presided over the first run on a domestic bank in more than 100 hundred years, as the global credit crunch gained traction.
Economically, a lot has changed for UK plc over the last 12 months - not least a global credit crunch that has seen banks more minded to hoard their cash rather than lend to one another. Indeed, so bad have things become that only on Tuesday the US Federal Reserve, along with other major central banks, unveiled its latest set of measures to inject liquidity into strained money markets - the Fed for its part opening the spigots to the tune of $200 billion.
All of this has come against a backdrop of slowing economic growth at home, coupled with an ever-present debt mountain (both public and private) and a deteriorating housing market.
Economic growth at the start of the year fell below trend for the first time since mid-2005, according to the National Institute of Economic and Social Research. Indeed, its figures showed growth in the three months to end-February at 0.5% after a downwardly-revised 0.4% in the three months to end-January. Official figures show Britain's economy grew by 0.6% in Q4 2007 after 0.7% in Q3.
On the bright side, consumer spending is still managing to hold up, although it could hardly be described as robust with retail sales growing by a modest 1.5% (like-for-like, year-on-year) through February after January's rebound from 2-year lows. The data - from the British Retail Consortium - also showed total sales, which include new floorspace, a moderate 3.9% ahead.
Not surprisingly, Darling has scaled back UK plc's growth prospects - GDP growth now expected to come in at 1.75%-2.25% this year, 2.25%- 2.75% in 2009 and 2.5%-3% in 2010.
Equally unsurprising, given Darling's lack of room for manoeuvre, was the thinness of content in this year's Budget, save for the usual tax increases imposed on the usual suspects, such as smokers and drinkers. Effective Sunday, a packet of cigarettes will go up by 11p, beer by 4p a pint, wine 14p a bottle, sprits 55p per bottle and cider 3p a litre. Duties on alcohol will rise by 2% above inflation for the next 4 years.
Meanwhile, the winter fuel allowance will go up from £200 to £250 for the over 60s and from £300 to £400 for the over 80s.
12 March 2008 © Moneyextra.com
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