So we know the date of Gordon Brown's final Budget at last: it is 21 March - little more than three weeks away. It will be odd, won't it, to have someone else droning away about the successes of the British economy? Maybe there will be a bit less droning.
At any rate, it will come as a relief to a lot of us to have some change, and it will of course be intriguing to see quite how Mr Brown's legacy is viewed a few years hence. But the Chancellor has to do it one more time and it appears extremely likely he will be able to present a pretty good account of himself.
Whatever view you take of the longer-term legacy - and I would side with the Institute for Fiscal Studies' judgement that there are considerable problems of finance as well as performance - he will be able to go out on a strong note. It will be a slightly better position than seemed likely in December at the time of the pre-Budget report.
Two things have gone right in the past couple of months: the economy has picked up some speed and public finances have improved a little, though perhaps not as much as they should have done given the faster growth.
The growth is the flipside of the rise in interest rates. The Bank of England increased the cost of borrowing to counter the rise in inflation and will probably do so again in the next couple of months. But it felt confident enough to do so because it was clear the economy could stand it. The better news is that the balance of growth seems to have shifted a little from consumption to investment. The former is still quite strong but the latter is now climbing at the fastest rate since 1998. That strength seems set to continue for the foreseeable future, backed as it is by high profitability.
As you might expect, companies tend to invest when they are making good profits and cut back when they are not. You can see in the left-hand graph above that this was particularly the case from the mid-1980s through to the late 1990s.
Since then, things have diverged somewhat. From 1998 to 2003, company profitability fell back a bit but investment fell much more. And since 2003, profits have shot up but investment has recovered only slowly. The most probable explanation for this is that there was a burst of IT investment ahead of the millennium (remember the fears about the "bug") and that companies needed three or four years to get the investment to bed down and generate the productivity increases expected of it.
Certainly, investment was not held back by a lack of profits. Citigroup notes that the present return on capital is the highest for at least 40 years and that this has implications for monetary policy. Just as the Bank had to hold interest rates low between 2001 and 2005 because, among other things, it did not want to discourage investment, now it is able to nudge up rates without, as yet, any fear of hitting investment.
Investment-led growth is better news for the economy than consumption-led growth. You need both but the UK has persistently excelled on the consumption side but done rather worse on investment. When the housing boom really has come to an end and is no longer stimulating consumption, we will need investment to help maintain demand. Meanwhile, the faster growth has meant that the Government might actually hit its borrowing target for once.
You may recall that for the past five years the Chancellor has had to keep explaining why he was borrowing more than he had expected. Last year, he even shifted his calculation of the timing of the economic cycle for the second time - the suspicion being that this was to ensure he kept within his "golden rule" not to borrow for current spending over the cycle.
Anyway, as you can see from the right-hand graph, in the early months of this financial year he seemed to be borrowing more than the previous year, not less, and in December he acknowledged yet another increase in planned borrowing, albeit a small one. To make the numbers look better, he increased air travel duty before the end of the financial year - a questionable legal device that suggested he was desperate for revenue.
Now it seems he will meet the revised target. The January figures (the latest we have got) show that borrowing is still running a little below last year.
Some of us think a bit of twisting is going on - for example, the NHS delaying paying contractors until the next financial year and the Revenue trying to get tax in early - but from Mr Brown's point of view, the numbers appear all right. Maybe he will even be able to make a small "giveaway" in his final Budget; Capital Economics thinks so.
But the medium-term problem remains: we should not be borrowing 3 per cent of GDP at this advanced stage of the economic cycle. Actually we should probably be in surplus, as we were in the late 1990s. That is the less agreeable side of the legacy.
There are a number of more specific issues that will have to be tackled by the next Chancellor and it will be interesting to see to what extent these are flagged up next month. PricewaterhouseCoopers notes that there will have to be changes in corporation tax to make sure we remain internationally competitive, as there are signs that the UK is slipping. There will have to be some simplification of the tax system, though delivery of that is in question. There will certainly be a lot of pressure to take into account rising house prices when inheritance tax is looked at - the Halifax calculates that there are 236 postcode districts where the average house price is higher than the inheritance tax threshold. And there will be some more climate stuff.
There is, beyond all the economics, a tactical element here: Mr Brown wants to leave this post with an aura of success. In that regard he is not unlike Tony Blair, for both have career intentions ahead of them. But it would be too transparent for the Chancellor to be seen to be trying to tie the hands of his successor. Yes, of course that is what he will do in fair measure, but it makes no sense to be seen to do it. So expect the Budget to be big on themes and short on detail. After the years of endless, relentless fiddling, that will be something of a relief.
He has been a lucky Chancellor, inheriting an economy that was well-suited to benefit from the present burst of globalisation. But he has also been a (reasonably) cautious one and he is not going to dump caution at this juncture. Why should he?
He's richer, she's poorer when couples tie the knot
Marriage is out of fashion and as yet shows no sign of recovery. The number of marriages in Britain last year fell to the lowest level since the 1860s, when the population was much smaller. The number had been rising slightly prior to that, and the explanation for the sudden fall was that the authorities had tightened up on sham marriages - when people go through the ceremony simply so that one of them can get British citizenship.
This seems a bit dispiriting, all the more so since most of the research seems to suggest that marriage is good for people: they live longer, are happier and so on. Politicians are pondering ways that the bond might be strengthened, perhaps by tax incentives. But now comes new evidence that while marriage is fine for men, it may not be so good for women. Two studies in the latest issue of The Economic Journal give it the thumbs down.
One, by Hélène Couprie of the University of Toulouse, looks at the gender balance in marriage. Take housework. Single women spend an average of 10 hours a week on this, while single men spend seven; but if they form a union, women spend 15 hours a week, and men only five. This is British data, not French, and it looks at all couples, not just married ones. Apparently, women have more taste for housework but, even allowing for that, they still get much less out of being a couple than men do.
It is no better in France. The other study, by Olivier Donni of the University of Cergy-Pontoise, looks at what happens to consumption in French households when their income goes up. It seems that any increase goes largely to boost the man's consumption and only a small portion goes to the woman.
The author believes the way forward is to try to improve women's negotiating position within a marriage - for example, by finding ways of narrowing pay differentials. Who gets to spend the money should be determined by "fierce negotiation" between spouses - something that may well be correct but does rather explain why people don't want to get married. Fierce negotiation, be it in French or English, does not sound like a great way of getting a marriage to run more smoothly.
What we need to know next is what might make marriages work better. The new interest of economists in studying happiness is intriguing partly because it uncovers more puzzles than it solves. (For example, why are Brazilians happier than the Japanese, when they are poorer and have much wider income differentials?) To their credit, economists are starting to delve into fascinating areas, even if the results are sometimes a bit glum.Reuse content