Broke

The credit crunch is going to severely dent the British economy over the coming year or so.

This news should come as no surprise to those who have followed the ongoing meltdown of the banking system, and the knock on effects on consumer expenditure. However, it would seem to be "news" to the government and Alistair Darling.

The National Institute of Economic and Social Research predicts that there will be a £16BN shortfall of tax revenues over the next two years.

Jim O'Neill, chief economist at Goldman Sachs, who forecast the collapse of the US property market, said that Britain was likely to be the worst hit of the world's economies.

Mr O'Neill is quoted in The Times and said that Britain, with its heavy reliance on financial services, was "in the eye of the storm of a deleveraging world economy".

He added:

"The UK mortgage market is effectively frozen . . . House prices are going to go through negative changes . . . It's going to be a challenge for UK policymakers."

It certainly is going to be a "challenge", the question is are our policymakers and government up to the job?