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If you had watched the Budget yesterday, without knowing anything else about life in Britain, you might have been convinced that the UK is the place to be if a global recession hits.
After all, Britain is well-placed to "weather economic storms". In fact, it seems Alistair Darling can't think of a better country to be in right now. Credit crunch? What credit crunch? Britain'll be just fine, particularly after ten prudent years of Gordon Brown.
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Yes indeed, if you were from another planet, you'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.
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On the other hand, if like most of us, you haven't recently landed from Mars, you'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 ever accept the blame for anything.
Here's the gist of what he said. The global crisis heading our way is all the fault of the US. The credit crunch "started in the American mortgage market" and now here in poor old Blighty, we'll just have to put up with the problems arising from our US cousins' profligacy.
So it's a good thing that here in Britain, thanks to ten years of Gordon Brown, we have such a strong, stable economy. So don't worry, everything's going to be fine. By the way, booze is going to get much more expensive, and so is driving. And I'm going to whack a tax on plastic bags if retailers don't start charging for them. Don't complain this is all for your own good.
Treasury plans for property tax falls
That's the executive summary of the speech. But the small print told a different story. The Treasury knows that the UK housing market is in trouble. It expects tax income in 2008/09 from stamp duty, inheritance tax and capital gains tax to be £2.25bn lower than predicted in the Pre-Budget Report. It also expects lower income tax receipts as City bonuses fall.
This is much more realistic. Let's make something plain here. What we've seen in recent years is the blowing up of a massive credit bubble. Britain's economic success' has been built on this glut of credit, channelled through the housing market. Our key business sector the City, basically is all about shuffling money in various creative ways. Our consumers are more indebted than ever before.
But 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 popped in 2000. It's something that only a fool, a liar or a politician would say.
As Liberal Democrat Treasury spokesman Vince Cable put it in The Telegraph: "The Government is hoping for the best, not preparing for the worst." Ambrose Evans-Pritchard put it even better when he said: "Not since Labour's Philip Snowden delivered the Budget in 1930 has any Chancellor offered an accounting more certain to be swept away by hurricane forces of global finance."
The truth is that the UK economy is already in a hole and it's going to get a lot deeper. Today's Telegraph for example, is littered with references to 1929 and the Great Depression. It's obvious to most people without an agenda that the US is now in recession (the Fed is now buying up sub-prime mortgage debt, a sign of sincere desperation). We can't avoid the same fate.
Drinkers and drivers bear the brunt
Yet the Government is still raising taxes, making life harder for people just as it's about to get a lot worse anyway. Alcohol has finally become a health tax target. From Sunday, prices will go up by 6% above the rate of inflation, and by 2% in real terms every year for the next four years. So the supermarkets in Calais will be over the moon about that one.
That said, if you're planning on driving across the Channel regularly to stock up on booze, then you'd better check the savings warrant it. Driving and car ownership is going to become more expensive too, with swingeing increases in road duty, though voter unfriendly hikes in petrol tax will wait until October (so much for the green' Budget).
So the Government's trying to kid us about the true state of the economy, and in the meantime, it's raising taxes, and borrowing more money to try to spend its way out of trouble. It's as if Gordon Brown never went away.
Turning to the wider markets
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US stocks fall as investors take profits
Yesterday's boring budget apparently had little impact on London stocks, although electricity companies including Scottish & Southern and International Power fell on Darling's calls for them to slash tariffs for poorer customers. Overall, the FTSE 100 was up 86 points at 5,776, led by miner Kazakhmys which jumped 16% on merger talk, and insurer Standard Life which announced expectation-beating results. For a full market report, see: London market close
Elsewhere in Europe, the Paris CAC-40 rose 69 points to end the day at 4,697. And in Frankfurt, the DAX-30 was down 25 points at 6,574.
Across the Atlantic, the falling dollar and rising price of crude (see below), along with profit-taking on yesterday's gains, saw US stocks end yesterday in negative territory. The Dow Jones closed 46 points lower, at 12,110. The tech-rich Nasdaq was down 11 points at 2,243. And the S&P 500 was also 11 points lower, at 1,308.
In Asia, the rapidly rising yen along with renewed fears about the state of financial markets prompted heavy selling this morning. The Japanese Nikkei had fallen 427 points to 12,433. And in Hong Kong, the Hang Seng was down 1,121 points at 22,301.
Crude tops $110, Dollar slide continues
Crude oil prices topped $110 for the first time yesterday but had fallen back to $109.97 this morning. In London, Brent spot was also lower, at $106.36.
Spot gold had risen to $988.60 today, in sight of its recent record high of $991.90. Silver had edged up to $20.36.
In the currency markets, the pound had risen to 2.0355 against the ailing dollar and was at 1.3052 against the euro. And the dollar was at 0.6411 against the euro and 100.16 against the Japanese yen.
And in London this morning, Morrisons - the UK's fourth-largest supermarket chain - announced that annual profit had doubled to £554m, beating analysts' forecasts. The company also revealed plans to buy back £1bn of stock.
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