After all, Britain is well-placed to Â“weather economic stormsÂ”. In fact, it seems Alistair Darling canÂ’t think of a better country to be in right now. Credit Crunch? What Credit Crunch? Britain will be just fine, particularly after ten prudent years of Gordon Brown.
If you were from another planet youÂ’d be pouring all your money into British assets, happy in the knowledge that the country was safe in the hands of Mr. Darling and his colleagues.
On the other hand, if like most of us, you are not an alien from outer space, youÂ’ll know that the Chancellor was talking cobblers.
Alistair Darling has clearly learned his Budget delivery lessons from Gordon Brown well. Be boring, is the key one. Trot off a lot of meaningless statistics, selectively compare your performance to other countries, and never accept the blame for anything.
The gist of what he said was that the global crisis heading this way was all the fault of the USA. The credit crunch started in the American mortgage market and was now here in poor old Blighty, weÂ’ll just have to put up with the problems arising from our US cousinsÂ’ profligacy.
ItÂ’s a good thing that in Britain, thanks to ten years of Gordon Brown, we have such a strong, stable economy. So donÂ’t worry, everything is going to be fine. By the way, booze is going to get much more expensive, and so is driving. A tax is to be whacked on plastic bags if retailers donÂ’t start charging for them. DonÂ’t complain Â– this is all for your own good.
However, the small print tells a different story. The Treasury knows that the UK housing market is in trouble. It expects tax income in 2008/2009 from stamp duty, inheritance tax and capital gains tax to be ÂŁ2.25bn lower than predicted in the Pre-Budget Report. It also expects lower income tax receipts as City bonuses fall.
This is more realistic. What has been seen in recent years is the blowing up of a massive credit bubble. BritainÂ’s economic Â“successÂ” has been built on this glut of credit, channeled through the housing market. Our key business sector Â– the City, basically Â– is all about shuffling money in various creative ways. The consumers are more indebted than ever before.
Unfortunately, the credit bubble that has been lifting us up for so long has now popped. So to suggest that Britain is well-placed to weather this economic storm is like saying that Lastminute.com was the best place to be when the tech bubble burst in 2000. ItÂ’s something that only a fool, a liar or a politician would say.
As the Liberal Democratic Treasury spokesman Vince Cable put it Â“The Government is hoping for the best, not preparing for the worstÂ”.
The truth is that the UK economy is already in a hole and itÂ’s going to get a lot deeper. It is obvious now that the US is in recession (the Fed is now buying up sub-prime mortgage debt and bailing out major financial institutions, signs of desperation). Britain cannot avoid the same fate.
So the GovernmentÂ’s trying to kid us on about the true state of the economy, and in the meantime, itÂ’s raising taxes and borrowing more money to try and spend its way out of trouble. ItÂ’s as if Gordon Brown never went away.