Pre-Budget Report 2008
Overview by Bob Wheatcroft
The end of Prudence
…but will it work. As widely anticipated the Pre-Budget Report contained wide ranging measures intended to bring about the end of the credit crunch.
The Chancellor set out to lay the blame for the crisis firmly in the hands of the US sub-prime mortgage debacle. The Pre-Budget Report was described as being part of a co-ordinated international response to an international problem.
It represents a sea change in economic policy going back with the emphasis being on fiscal policy management for the first time in 30 years. It seems that the days of monetarism are over – at least for now. This also means that, for the first time in several years, there is a fundamental difference in economic policy between the political parties.
Interestingly the boost to the economy was of some £20bn which was in fact rather less than expected. Possibly this was because the Government felt that the markets would react badly to a larger figure – perhaps with a run on the pound as suggested by the shadow Chancellor last week.
The measures themselves were mostly a mixture of cuts in spending and business taxes with related announcements of how and when it is all going to be paid for.
In the end it is all down to confidence. If enough people believe it will work then it stands a chance. The reaction in the financial markets is crucial.
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