On the assumption that this week's Budget is enacted in its present form, the reversal of consumers' fortunes will be complete by mid-1994. The employed labour force, which has already dropped by two million, or 7 per cent, in the short space of two- and-a-half years, may still be declining. Lower pay increases will be more than wiped out by the seeping effects of devaluation and the unwinding of recent interest- rate cuts on the headline retail price index. Little spare cash is likely to be released from the housing finance market in the near future. It is in this environment that next year's income tax, National Insurance and VAT bombshells will become effective. The eclipse of consumerism in the UK is imminent.
The rise in consumer imports and the associated expansion in the balance of payments deficit foreseen by the Treasury is a mirage. While the likelihood is that economic recovery will be fitful and slow, its bedrock will no longer be personal consumption. What a pity that this change of emphasis was not heralded five years ago.
17 MarchReuse content