Leading Article: A snip in time, Mr Chancellor

NEVER mind the Oxford Street crowds; British consumers are about to have their belts tightened for them. Norman Lamont started the job, with a pounds 4.8bn package of tax increases only now taking effect. Kenneth Clarke found more ways of raising revenue in his November budget: freezing allowances, tightening up on tax avoidance, raising excise duties, and taxing insurance premiums and air travel. Together, the two have increased the tax burden by pounds 7.4bn - 3.5 per cent of GDP, and the sharpest pull on the fiscal lever since 1945.

Britain's public finances left little alternative. But the higher taxes coming on stream will hit spending and consumer confidence. With Christmas presents distributed and January credit card bills opened, British families will be asking themselves hard questions about what they can afford in 1994. Their pessimism will be exacerbated by the fact that earnings are rising only slowly - in many cases by no more than inflation.

Reducing the burden on borrowers is the only way to redress the sharp shrinking effect that the Clarke budget will otherwise have on the economy, without jeopardising the repair work on the public finances. But until recently the Chancellor had grounds to hesitate. The inflationary outlook remained doubtful, he could say; cheaper money might set prices out of control again.

That argument no longer holds water. All the indicators point unambiguously to sustained low inflation. Price wars have broken out in industries ranging from food retailing to holidays. Pay settlements in the autumn dropped to their lowest level for 15 years. Oil is cheaper, and regulators have declared their intention to hold down domestic water prices more successfully than before. As a result, many analysts are predicting that inflation will probably peak just above 3 per cent a year in the summer, and fall back to 2 per cent by the end of 1994.

The Chancellor should therefore move quickly. To influence the building societies before they send out their January mortgage demands, he should take a full point off base rates immediately. A delay, or a smaller cut, might be tempting; but half-measures would merely require him to restore confidence in the spring with a larger and perhaps less effective cut. Mr Clarke should act decisively now.