In today's Budget, Chancellor of the Exchequer Gordon Brown has revised his forecasts for this year's growth downwards to 2-2.5%. This forecast remains optimistic in relation to the forecasts of most independent observers. At the same time, he has raised his expected level of borrowing this year from £20billion to £27billion - a substantial increase.

The government is perfectly right to borrow when the economy is in the doldrums - when rapid growth does not exist to deliver tax revenue windfalls and when unemployment is rising (it isn't yet) to increase government outgoings on benefit payments. The story we are hearing from Mr Brown is a mixed one, though - he remains optimistic about growth, yet for some reason still finds the need to borrow more.

At the risk of sounding pessimistic, my view is that Mr Brown's forecast for growth is high. This would be so even if he were not increasing his borrowing. But the increased borrowing stores up some problems for the future. At some stage what he borrows must be paid back. If that can be done out of tax revenues delivered as a windfall from economic growth, then all well and good. But if he finds that he will need to raise taxes in future budgets in order to get his books to balance over the business cycle (his stated aim) then those increased taxes will stunt future growth still further.

The hike in the UK's minimum wage to £4.50 per hour has just been announced. The announcement has coincided with the news that, while the jobless total has fallen once again in February, the claimant count (the number of workers claiming unemployment benefit) has risen. We know that the recovery of the economy from its soft landing has been sluggish so far, and it is unusual to have such slow growth for such a long period without unemployment rising. To raise the minimum wage under these circumstances is cavalier - though clearly less so than would have been an even larger hike.

Minimum wages are not always bad for employment - Alan Manning and other economists have shown convincingly that there are circumstances where imposing a minimum wage can indeed raise employment. But a large increase in the minimum wage at a time when the economic growth is slow - and when the tax implications of war finance threaten future growth - is risky.

UK inflation has hit 3%, the upper limit of the target range which the government provides to the Bank of England. This is likely to reduce the scope for the central bank to reduce interest rates further - something it might ordinarily have wished to do in light of the sustained sluggishness of the economy.

The news about inflation is unlikely to lead to a relaxation of the government's 2-3% target band for inflation, however. The increase in prices has been fuelled largely by increases in oil (and petrol) prices. That increase is likely to be reversed as winter turns to spring. The hike in oil prices is largely attributed to the hard winter suffered in many parts of North America, and the consequent increase in demand for oil. Once the weather gets warmer, demand will fall back.

On the supply side, many producers have been operating close to capacity, and there is little evidence to suggest that the oil price hike has been generated by supply restrictions. Of course, that could all change in response to events in Iraq. But to the extent that any conflict will be short, there is unlikely to be a severe supply shock, and so oil prices should fall back by the middle of the year. Consequently inflation should fall back to a central position within the target band.

The Euro has been scaling new heights of late, against both the dollar and sterling. At first blush, this might seem odd. Growth in the eurozone is still more sluggish than in the USA or UK, and this is forecast to remain the case over the next 18 months.

But in other respects, the strong showing of the euro makes a lot of sense. The US and UK are both running current account deficits on their balance of payments - unlike the eurozone which is in surplus. So demand for euros is relatively high, since the net exports of the eurozone need to be paid for. For exactly the same reason, the demands for dollars and for sterling are relatively weak. The trade surplus of the eurozone is, in large measure, a consequence of its sluggish growth - people in those countries just aren't consuming enough to be importing as much as they're exporting.

Moreover, the threat of US and UK involvement in war - and the financial implications of that - means that higher taxes or squeezed government spending are on the cards for the medium term in these countries. Medium term, it is inevitable that the economies of the US and UK will take a hit if what seems likely to happen in the Gulf comes to pass. At the same time, the US seems to be edging away from a policy preference for a strong dollar.

Germany, in particular, is vulnerable to the current strength of the euro - its exports are beginning to look expensive, and so demand for its output is likely to fall. But the strength of the euro may yet turn out to be a blip exacerbated by the current international political situation. If the threat of war passes, or if war is short, the markets may well revert to a cautious optimism about the prospects for the American and British economies, the dollar and pound may well recover by the summer, and the overvaluation of the euro may quickly be corrected.

Council tax has hit the headlines. There are two reasons why. First, council tax bills are set to rise considerably this year. Secondly, the rise looks like being unevenly distributed across the regions, with the heaviest increases being in the southern part of England.

The two issues arise from different, but equally interesting, sources. Locally raised taxes contribute to the coffers of the local authorities only about a quarter of the budget. The rest is grant from central government. This means that for every £100 worth of revenue and expenditure in a local authority, only £25 is raised from local taxes. If the authority wants to raise its expenditure by a small amount - say 5% - then that £25 must rise to £30. That's a hike of 20% in council tax bills. In other words, even small differences between local councils in their preferences about expenditure can have a massive impact on the coucil tax bill received by residents. There is a cure to this problem - and that is to make a higher proportion of local authorities' revenues locally controlled. The proportion of local authorities' revenue that is accounted for by central government grant needs to be eroded over time. This is an essential prerequisite for enhanced local democracy.

The second issue is all about why councils in the south are complaining. It is certainly true that the largest increases in council tax are concentrated in the southern part of the country. The reason for this is that there have been recent changes in the way the governement compensates councils for differences in their ability to generate local tax revenues, given the rate of council tax. In areas where house prices are typically high, a given structure of council tax rates generates more revenue than in other areas - simply because a higher proportion of houses are valued in the higher tax bands. The new funding mechanism used to determine the central government grant to local authorities includes a system that corrects for this bias. That means that areas where house prices are high are now being treated less favourably than in the past. But it's important to recognise that the change in funding mechanism has been introduced purely to get rid of the bias in the system that has worked in favour of these regions up to now. It would certainly be consistent with the facts to argue that - far from being disadvantaged now - the southern counties have benefitted from substantial, albeit accidental, central government munificence in the past.

The pensions crisis in the UK is likely to have major impacts on the way we work. Essentially, we are faced by a double whammy. People are living longer and so pensions funds need to be buoyant in order to support the increased number of retirees. But the current poor performance of equities markets has deprived pension funds of this buoyancy.

The markets are likely to recover, so things may not really be quite as gloomy as they appear at the moment. But the fact remains that pension funds made investments at a time when optimism about the long term strength of the markets was excessive. There will be a shortfall, and that will require many people to work for longer than they had planned.

Retirement typically occurs at a convenient point in the life cycle - the children have left home, demands on the family budget have gone down. Just before retirement, for many people, the demands on the family budget are high. As expected expenditures of households fall, so retirement brings about a means whereby income can come into line with these expenditures.

But if pensions prove to be inadequate, or if their payment is delayed, many more people than now might want to enjoy several years of semi-retirement - withdrawal from pressurised full-time jobs into a more casual form of employment. This might mean consultancies, it might mean part-time work, or it might mean starting altogether new careers. It could result in a substantial change in employment structures in many industries (especially in the service sector), with employers choosing to contract work to self-employed older workers in preference to in-house staff.

With pay scales often depending on experience, older workers have often found it difficult to gain employment. With a freer market, older workers able to set their remuneration competitively might become cheaper to employ. Age discrimination might become less common. And the increased supply of labour to the market is likely to dampen wage growth for all types of worker. A longer working life and lower pay does not make for cheerful reading. Perhaps on this issue economics really is the dismal science.

But, on the bright side, the markets do seem to have passed their nadir. And the other source of the problem is our increased longevity. What's that they say about every cloud?

London's new congestion charge comes into force today. Vehicles entering central London will face a £5 daily charge. Payment is to be made by a variety of means (SMS, phone, web, ticket booths etc.) and monitoring is by CCTV reading number plates.

Road pricing has been on the agenda for 40 years. Alan Walters (who later became Margaret Thatcher's economic guru) proposed the introduction of road pricing in the UK in the early 1960s. The roots of the idea go back further.

The rationale is simple. A driver who takes his or her car into a congested area contributes to that congestion, but up till now has not paid a price for the inconvenience caused to other people. This is what economists call an externality. The tax introduces a price for this, and therefore compensates for the externality.

No doubt the charge will infuriate many people who have grown used to having something that they value given to them for free. (In that respect, it is a bit like the proposed hikes in tuition for universities.) But the congestion charge is undoubtedly good economics. The niggling doubt concerns the capability of the technology to cope with the task in hand. If it can, the benefits of the scheme will be substantial indeed.

Reports today suggest that Chancellor of the Exchequer, Gordon Brown, has privately decided that Britain should not join the European single currency. While at the present time I think this is the right decision, I do not think the Chancellor's reasoning is sound.

The reason reportedly given by Mr Brown is that he regrets the decision of the European Central Bank not to cut interest rates, and that he values Britain's own flexibility to do so. Nothing would benefit Britain more at present than a cut in interest rates in the Euro zone. Yet by staying out of the Euro, we have ensured that we have no influence in this decision. By Mr Brown's own reasoning, we should join, so that we can have influence (though of course not control) over such a key determinant of our own economy's success.

But in my view the time is not yet right to join the Euro - albeit for different reasons. Our economy is not fully in synch with that of the rest of Europe. And so the time for us to make the (politically desirable) decision to join remains some way down the road.

Interest rates have been cut today, to 3.75%, by the Bank of England's Monetary Policy Committee. There has been some debate in recent days about whether or not such a cut is desirable. The argument is that the downturn in manufacturing in Britain, in particular, is due to a fall in international demand rather than low demand within Britain, and that therefore a cut in domestic interest rates will not fix the problem. Those favouring this line of argument suggest that a cut in interest rates will boost an overheating housing market, and would therefore be damaging. In constrast, I would have to say that I agree with the Bank of England's position. Retail sales in the Christmas period disappointed many, and there are signs that the housing market boom is slowing. The fillip provided to the domestic economy by the interest rate cut is therefore very welcome.

The stock markets in major economies are in a terrible slump. The British FTSE100 index has fallen for a record 11 straight days, and has now lost half its value over the last 3 years. By any standard for normal times, shares in the FTSE should be considered as undervalued. Comparing their current value with a 20 year trend, the undervaluation seems to be quite severe; remarkably, the trend value is about 1500 points above the current index of 3480. An adjustment was certainly needed after the excessive optimism of the late 1990s - it's only in the last 6 months that the series has fallen below trend. If these are normal times, the market should bounce back, and bounce back well.

The troubles of Australian insurer AMP suggest, however, that these might not be normal times. They have been exposed to the fluctuations of the FTSE, and there is doubt as to whether they can continue to meet claims. Once financial institutions like this crumble under the weight of an underperforming stock market, confidence can crumble too. If that were to happen, we might never regain the old trend. There could be a catastrophic break with the past. What we are seeing might be the start of a new trend in the financial series, and the start could be from a lower base. In a nutshell, we might be in for a hard time.

That said, AMP is not a firm where problems have emerged suddenly. Their former CEO, Paul Batchelor, resigned in September 2002 after poor financial performance. Marc de Cure, their former financial officer, had resigned a few weeks before that, after several months of financial setbacks. Their problems appear to owe rather a lot to investment decisions that, with hindsight, appear ill-judged and atypical of the behaviour of other firms.

It is certainly possible that the current drop in share prices represents a catastrophic break from the past. By my money still remains with the view that a not insubstantial rebound is likely.

The government is considering giving itself the power to take over the running of British Energy, the troubled electricity generating firm. A takeover of this sort, which mimics the recent conversion of Railtrack into the non-profit Network Rail, might be innocuous in itself. But it does not confront the real issues facing the company.

Some of the privatisations of the Thatcher era have been extremely successful. The success of others, usually the more complex ones such as rail, has been more modest. When a monopolistic state firm is broken up into numerous providers, each of which must have contractual links with others, it is essential that the contracts are carefully designed and that the prices at which resources are transferred between the new firms are appropriately set. It is not clear that this has been the case with British Energy, and it certainly wasn't the case with Railtrack. Taking over the firm will not, of itself, fix these problems.

Nuclear energy has a lot of advantages - it is clean, and it does not burn up rapidly exhaustible supplies of fuel. But it is not cheap; safety considerations and the costs of decommissioning add to the bill. There's a powerful case to suggest that British Energy has not been allowed to compete on a level playing field with other energy providers. Maybe that's the case. Maybe the advantages of nuclear electricity even justify some sort of subsidy, or some adjustment to the prices that the firm currently faces. But if so, the subsidy should be out in the open. If the government takes control of British Energy, can we be sure that there will be transparency?

Today's the day the White Paper on higher education was published, announcing that differential tuition fees of up to £3000 per year, to be paid by students via an income contingent loan, could be levied by universities from 2006 onwards. This replaces the current fixed tuition of £1000. The greater flexibility, whereby different degrees in different universities will be able to charge tuition at different levels, has to be a good thing, moving us nearer to a market situation. Many people are, of course, concerned about rising levels of student debt; the repayment scheme that is proposed should spread out repayments over a longer period than at present, so that the repayment per month will for a typical student be lower than now.

The proposals have come amongst a raft of further initiatives aimed at widening access to higher education. This is, of course, desirable. But it needs to be borne in mind that many of the barriers that young people from less affluent backgrounds face in accessing higher education are barriers that exist in the secondary (and even primary) schools. Social engineering at entry to university is no substitute for fixing problems in the schools - and it makes no accommodation for young people who leave education altogther at ages 16 or 18. I'm all for widening access, but you can only positively discriminate in favour of some people if you discriminate against others. I can foresee all sorts of interesting cases coming up to the European court of human rights! To enforce aspects of the widening participation agenda, the government is proposing the creation of an access regulator. I dare say that after a couple of years, this will mean regulation of higher education in all sorts of ways not currently envisaged. But to flourish, universities need freedom from the state, not more regulation.

The most disappointing thing, though, is that the government has stubbornly held to its target that 50% of young people should pass through higher education by the end of the decade. This is when there is already much evidence to suggest that 30% of recent graduates are in jobs for which they are overeducated. 50% is a nice round figure, but if the government really wants to set a target of this kind (and why should it?) it really does have a responsibility to come out and justify it. That, it still has not done.