Ignore this Budget – the important one is still to come

You thought you’d over-reached your overdraft limit and more than maxed out your plastic. The credit card companies were about to demand their money back with menaces. Yet the bills have kept landing on the doorstep.

And then you discovered that your finances weren’t quite as badly holed as you thought. One of the big bills you had to pay turned out to be a bit smaller than you’d feared.

In other words, you’ve now got a little bit of breathing space before the bailiffs start knocking on the door.

So what do you do?

If you’re Alistair Darling making your Budget speech, the answer is… nothing much. You talk tough. You talk about sacking civil servants. And you tell your lenders you’ve mastered your debt addiction, and that your future income is going to rise fast enough to pay your rising interest costs.

Oh, and you repeat you’re going to sell your garage (at least, that’s what the Dartford Tunnel felt like the last time I tried to get through it). 

But you can afford to. You know that the vast debts you’ve run up will soon be someone else’s problem. So you focus on composing your CV for your next job.

The government’s budget deficit may prove to be a ‘mere’ £167bn this year compared with last year’s forecast of £178bn. But in money terms, it’ll still be by far the worst result ever.

As for the Chancellor’s future-year borrowing guesses – £163bn next year supposedly dropping to £74bn by 2014/15 – remembering previous forecasts mistakes, what are the odds of these being right?

Maybe we should ask the Tote before the government sells that too. But all the while, as John Stepek explained yesterday, the overall national debt mountain is still growing fast.

Meanwhile the Budget’s 3-3.5% growth forecast for 2011, even though cut from the earlier 3.75%, still looks way over the top. But the Chancellor has to pretend the economy will grow fast enough to fund all that borrowing.

In a nutshell, these were all pre-election forecasts. We’ll need to see the real ones with the next government – and Chancellor.

To keep the UK’s creditors happy, there’s “still much to be done”, says Jonathan Loynes at Capital Economics. “The forecast halving of the deficit over the next four years still relies both on spending cuts which haven’t yet been properly detailed, and on almost certainly over-optimistic projections for the economy. Further decisive action to put the public finances back into a sustainable position will still be needed after the election”.