Sunday 23 November 2008

The real story over the PBR

Some weird positioning and changes in the pre-spun versions of the emergency budget over the past couple of days; tension reported between Darling and Brown - first 1% then 2% then nonsense, nothing near that...

The real story here is not whats in the announcement tomorrow. The real story is what the Treasury were told, during the last days of last week, about the money markets and the chances of getting any of this debt away without pulling the pin on sterling. The real story is the 40 billion of City tax revenue which will never come back.

Brown might make a career of lying to the voters, but the money markets won't wear it.

Hence the assurance that Darling will tell us how he's paying for it; hence perhaps the suggested move to a temporary VAT cut (not much of a spending boost at that level, but more reassuring for the bond market); hence the fact that the VED postponement and the 10p rate payoff - which were hinted at all year as sops to the electorate - have now suddenly somehow become important Keynsian measures to boost the economy.

If all we get on Monday is what has been carefully trailed in the Sunday papers then there is no way on God's green earth that it will be sufficient to put a bottom in plunging consumer confidence. Remember, all economies are confidence tricks, they function only as long as everyone is prepared to believe in them - once that breaks it's every man for himself and short of monumental measures to boost spending (which Britain cannot afford thanks to Brown) almost any fiscal tinkering is too little too late.

Brown, having called for full speed ahead - has been told by First Officer Darling that the engines have no more power. Now he is going to re-arrange the deckchairs.

Still, we might get a sterling bounce and a market rally on the back of it..

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