PM should say 'sorry, Darling'

Thanks to Gordon Brown's five-year spending binge, we now have a budget deficit of 3%. So just as an economic slowdown threatens, Darling is unable to soften the blow with a well-judged rise in public spending or a tax cut.

The papers have been full of news about champagne rationing.

According to wine merchants Berry Bros & Rudd, demand for the best bottles of the stuff is so high that it may have to open waiting lists for them, particularly Magnums, Jeroboams and Methuselahs (which contain eight bottles' worth).

Why? Thanks to steady rises in demand from the West, plus the surge of enthusiasm for expensive drinks from the newly-rich consumers of India, China, and in particular Russia, overall demand is rising fast: up 11 million bottles to 333 million bottles in the 12 months to August. There just isn't enough to go around, say Berry Bros.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

I can't get myself too worried about this, partly because I'm quite partial to Prosecco, but mainly because, rather like the fact that I can't afford a house in Lancaster Gate, this is a problem the market is going to take away before it really upsets my plans.

Just look at the state of the world. The US Federal Reserve has cut its forecast for GDP growth next year back to 1.8% (which means that, at best, it will be growing a good 30% slower than Japan); stockmarkets across the globe have had a horrible week, falling a percent or two nearly every day; oil is back above $98 a barrel; and the fall out from the subprime crisis has clearly only just begun.

We are seeing the beginning of what my colleague Bill Bonner and the other great bears out there like to call the Great Unwind: the full-scale collapse of the credit bubble.

Here in the UK, we've got a couple of other problems too. Our banking system is fast falling into disrepute, thanks to Alistair Darling's Northern Rock nonsense. Our housing market is a mess (anyone who still thinks it is healthy should visit to gauge the level of desperation among sellers, or just take a peak at Paragon's (PAG) share price). And the Treasury and the Bank of England are both forecasting slowdowns in economic growth.

Worst of all, just when we need them to be in good shape, it's becoming clear that our public finances are a complete mess. As Ian Campbell points out on Breakingviews, back in 2002 the overall budget surplus was 4% of GDP. Today, thanks to Gordon Brown's five-year spending binge, we have a budget deficit of 3% of GDP. In the first seven months of this year the Government borrowed £27.4bn up from £17.5bn in the same period last year.

So instead of being able to soften the blow of economic slowdown with a tax cut or two, or a well-judged rise in public spending, "the Government may be forced to exacerbate it by reining in spending or raising taxes". Still feel like champagne? Probably not. Brown should be ashamed of himself for getting us and poor Darling into this absurd situation.

And as for Berry Bros, they should stop producing stupid press releases, put their prices up immediately and flog as much fizz as they can in the next few months. That way at least they'll have a pile of cash in their coffers to see them through the many lean years ahead.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.