Alistair Darling has apparently told his cabinet colleagues that there is no extra money available, so they will have to avoid increasing government spending plans for next year.

Well I have news for him; he should tell them to cut their spending, not just keep it at the same level. With the economy under pressure, there is no way he can follow his predecessor in applying stealth taxes to raise revenue; we are all on to that game, now.

To make life more difficult for his book-balancing efforts, the Chancellor’s options are severely constrained by the enforced giveaway following the absurd error of judgement over removal of the 10p tax rate; which was the result of woolly thinking and (some might say) both hubris and negligence, which will cost an estimated £2.7 billion to sort out. This has compounded the cost of shoring up Northern Rock (for which government is responsible more by acts of omission than of commission).

With Gross Domestic Product (GDP) slowing at best (we are not technically in recession until GDP actually falls for two successive quarters, which may not happen, whatever we may think as home-owners watching property values fall) the Chancellor will have even less to spend.

Every family knows that there comes a time when belt tightening is the only option; we cannot afford to borrow any more as a nation, so we must bite the bullet and spend less. Government is full of wasted spending on administration and “quangos”; cut out the unnecessary waste and the Public Sector Borrowing Requirement (PSBR) will fall.

It is therefore really worrying that the “rethink” over the golden rule (that borrowing over the economic cycle should be for capital spending only, not to cover current costs) is allegedly leading some trades union leaders in the public sector to start pressing for higher pay settlements (Daily Telegraph 22/7/08).

Civil servants should remember that they are in a privileged position compared with the rest of us over pensions and also in terms of job security. If they press for higher pay, this will filter through to the private sector and inflation will return to the wage-driven spiral we have all seen before.

For unions to assume that they can press for higher wages when the economy is in decline will make matters worse; and they will be just as culpable as those whose self-serving actions led to the credit crunch in the first place.