Darling's dilemma

DR STEPHEN BARBER COMMENTS ON DARLING'S DILEMMA

Dr Stephen Barber, Head of Research at Selftrade, an independent online broker comments:

"All the pre-budget spin emerging from the treasury suggests that a key part of this week's budget will be to claw back spending by way of efficiencies in an attempt to tackle truly dreadful public finances. This is somewhat schizophrenic and will be greeted by the markets as such. So far, the chancellor has been engaged in a bout of spending to kick start the economy and combined with the cost of bank bailouts has always meant that the exchequer would need to make up the deficit when recovery comes- either through spending cuts, tax rises or indeed both. But to start ahead of recovery sends mixed signals. Alistair darling will be well aware of the political and economic consequences of such action and so I suspect we will see something at least politically cleverer emerging from his Gladstone box even if this budget won't be anything like as spectacular as the last time we saw him. We shouldn't forget that if the banks are put into decent working order, their de-nationalisation could give a huge boost to the public finances. But despite good banking news of recent weeks, with notable share price rallies, bank recovery can only result from broader economic recovery - it cannot lead it as one might usually expect."

Dr Stephen Barber has a PhD in Politics and is a leading economist. He is happy to talk further or write articles on this subject or any of the topics listed below.

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