Red Button

Well, today's news on the UK economy sure ain't good. Super Gee, attempting to draw a line under the 10p fiasco (he abolished the lower tax rate benefiting the country's poorest) today borrows £2.7B for a hand-out to lower-income families. Alistair Darling is crucified on this morning's Radio 4 where he is more-or-less called a liar when he says govt has not broken the "Golden Rule" of borrowing only for investment. Despite Darling, no one can recall a "mini budget" like now and certainly never a tax change two months from the annual budget. Adding to the troubles, housing minister Caroline Flint arrived at 10 Downing St. for a cabinet yesterday with a set of briefing papers unwittingly visible and photographed by the pap: Dear Reader, government hopes for a 5-10% property price decline while indicating it could be much worse. Caroline notes: "we really have no idea." The Royal Institution of Chartered Surveyors chimes in with its most pessimistic house price survey since measurement began in 1978. Oh, and inflation: 3% in April or 1% more than the Bank of England's target. Result: don't expect fiscal stimulus from interest rate reductions and more bad news for home owners. While it is damn gloomy, net borrowing in the UK stands at 2.5% GDP and while high for most big economies (excluding the good 'ol US'A), it certainly is not near crisis level. Still in 1990 a similar hallucinatory Treasury (this time Tories), projected the books would balance by 1993-94 when the reality became an overdraft of 8% GDP. So where from today? Firstly, Gee must consider breaking his arbitrary pledge to keep public sector net debt below 40% GDP. Secondly, there must be a debate about how big government should be - just in time for the next general election, thank goodness. Image from Techzoogle.com