Leading article: The chill winds in the high street - and beyond

The roots of this decline in confidence are not hard to discern. The gradual slow-down in house prices this year has made people less inclined to spend. Rising petrol prices and soaring fuel bills have put a strain on household budgets. People feel less well off than they did a year ago. Normally, such a slowdown would be a signal for a generous cut in interest rates - the conventional way to boost consumer spending. But yesterday the Bank of England kept rates on hold at 4.5 per cent. This is because any dramatic cut would have risked exacerbating the recent upsurge in inflation. What is good for the high street is not always good for the rest of us. This points to some ominous imbalances in the broader British economy. The consumer spending slowdown is only one part of the story.

Gordon Brown's record of economic management is looking vulnerable - more so than at any time in his eight-year tenure at the Treasury. It is now hard to see how Britain can avoid an economic slowdown over the next two years. Responsibility for this cannot be laid wholly at Mr Brown's door, of course. The soaring price of energy has affected the whole world. We are also witnessing a general downturn in the global business cycle. Any British chancellor would have had to deal with these unpromising global conditions. (And it should be remembered that Mr Brown has proved his critics wrong in the past.)

But Mr Brown must, nevertheless, take a hefty share of responsibility for the present worrying situation. A question mark hangs over the public finances. Last year, Mr Brown promised to cut some 80,000 civil service posts to fill a black hole in his budget. But there is little sign of this being put into effect. Indeed, public-sector job creation is still vastly outstripping that of the private sector. If Mr Brown continues in this manner, it will prove impossible for him to balance his budget. The Chancellor urgently needs to push through his promised savings, whether by adopting a more rigorous approach to hiring, or by an increased use of the private sector.

There are only so many times Mr Brown can tinker with his "golden rule". And the figures all seem to be turning against the Chancellor. He was recently forced to downgrade his growth estimates for the economy. Without strong growth, Mr Brown will not be able to meet his spending commitments. In this context, one can understand his desire to move next door as soon as possible.

In many respects, Britain is well placed to cope with this downturn. We have a competitive economy, flexible labour markets and a proactive monetary policy. In theory this should help to protect us from the worst of the chill economic winds. But the increasingly precarious state of the public finances drastically reduces the Government's room for manoeuvre. Confidence can evaporate rapidly. Unless Mr Brown takes action to get the economy under control, the consequences - both for him and the country - could be bleak.