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The stakes now mounting for Monday's pre-Budget report are almost unprecedented. The deepening crisis is creating ever-greater expectations for the Government's promised economic stimulus plan.
Yet the fallout from Gordon Brown's initial rescue package, the bank bail-out, is still far from over: banks are under increasing pressure from ministers to resume lending but are still resisting.
Meanwhile, Mr Brown's conversion to massive borrowing has changed the political map. Not only has it been a leap too far for the Tories, who this week abandoned their long-standing promise to match Government spending. Now Alistair Darling is trying to resist the wilder borrowing and spending urges of his neighbour.
Borrowing is forecast to hit perhaps £90 billion next year but that may be pushed even higher as the Treasury tries to plug the gap left by falling tax revenues. Mr Darling is committed to stable public finances in the medium term but that will be impossible without spending cuts and tax rises.
Ministers will hope that these can be put off until after the next election — which is one reason why, as we report today, they are seriously considering a June election. Despite the aim of the expected package of tax cuts, such timing would also hope to avoid the worst of the recession's effects on the real economy. For while tax cuts may mitigate the pain, it is hard to see how even a generous package could counteract the sort of chaos already unfolding.
Global markets plunged again yesterday, while the price of oil dropped below $50 a barrel. In the US, a bail-out of the country's stricken big three car makers remains stalled. And in London, as our survey today suggests, job losses will mount fast.
But voters do now have a real choice: between a full-blooded Keynesian splurge, funded by borrowing, or a more cautious Conservative approach, based on serious belt-tightening but perhaps with lower taxes in the future. Monday's statement will be crucial to Mr Brown's renewed popularity; likewise, shadow chancellor George Osborne's response will be vital to shoring up his party's position. The economic outlook is grim: but the political battle of ideas is just beginning.
Train drain
The growing storm over rail fare rises suggests that ministers and rail operators have seriously underestimated commuter discontent. Fare increases of up to 11 per cent come into force on 2 January. Rises in peak fares are based on this July's inflation rate, 5.3 per cent, plus one per cent, although Southeastern has been given permission to hike fares by three per cent; operators are also allowed to increase some fares by a further two per cent. Off-peak fares are unregulated: such fares on First Capital Connect's Thameslink services will jump by nine per cent. This will add thousands of pounds to some season tickets.
All this really amounts to is insulation for rail company profits while commuters take a bigger hit, at a time when most are already having to tighten their belts. In any case, inflation is already falling: new fares based on the summer's inflation spike effectively lock in a windfall profit for the operators. Transport minister Geoff Hoon should have the spine to stand up to rail companies operating virtual monopolies, regulate off-peak fares, and stop them fleecing passengers.
And celebrating...
Free SPIRITS. It is clear from the BBC Trust's report today that Jonathan Ross's editors failed in preventing transmission of his notorious phone calls, with Russell Brand, to the actor Andrew Sachs. This was a clear and serious error of judgment by Radio 2 compliance editor David Barber: what Ross and Brand did was quite unacceptable. But the BBC's response should beware of stifling talent. Broadcasting needs anarchic free spirits to keep its edge and to take risks. They need managing, but without such mavericks, BBC TV and radio would be much poorer.
Reader views (1)
Of course the government don't care about fare increases, their client state of welfare dependants do not commute. simple
- Neil, london, 22/11/2008 00:44
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