LETTING THE GOOD TIMES ROLL

Kenneth Clarke must wonder what is so difficult about being Chancellor of the Exchequer. Since he took over at the Treasury in May 1993, the UK economy has grown at an annual rate of 3.5-4.0% and unemployment has continued to fall. Underlying inflation has remained around the middle of the government's 1–4% target band. And the current account deficit on the balance of payments has shrunk. True, the Chancellor had to bring in a tax-raising Budget in November, though even here much of the hard work had been done by his predecessor. The policy decisions over the next year or so will prove much more tricky, however. The Chancellor faces pressure to relax fiscal policy in the Budget. And he will almost certainly have to raise interest rates - possibly before the end of this year. In this Forecast Release we look at what the outlook for the economy now implies for the policy judgements that the Chancellor must make over the remainder of this year.