If Britain were a local sports club you would decline to be its treasurer. Expenditure exceeds income, spending is already committed for three years in advance, and revenues look shaky. When Alistair Darling, who only recently took the job of chancellor of the exchequer, delivers his first Budget a week on Wednesday, he may be tempted by tax cuts and spending increases in the name of fiscal stimulus. But it is fiscal discipline that Britain needs.

The basic dilemma is this. Britain has been growing at or above trend in the last couple of years yet its public finances are in deficit. In the medium to long-term fiscal policy needs to be tightened. But in the short term, the risk of a nasty slowdown or recession has risen because of the problems in the financial sector, and if that risk materialised an ill-timed fiscal tightening could make matters worse.

One thing Mr Darling can do is reflect the uncertainty about economic prospects. Unlike in budgets of the recent past, growth forecasts should be conservative and, for preference, should be expressed as a range rather than a single point. Slow growth in 2008 should not be offset by assuming rapid growth in 2009 and 2010.

Mr Darling could also be more realistic about his tax forecasts. At present the Treasury expects buoyant revenues from tax on corporate profits and from stamp duties on property transactions. On more realistic assumptions, and even without allowing for the possibility of a housing slump, the fiscal situation is worse than it first appears.

That is one reason for Mr Darling to adopt a tight budget. Another is that, with the government’s fiscal rules now largely discredited, the UK can ill afford any further damage to its reputation for sound public finances. Sterling has fallen rapidly in recent months and inflation is high. If international investors begin to lose confidence the UK could end up with a difficult currency and inflation problem.

The need for fiscal stimulus to support the economy can be exaggerated. Not only is tax a clumsy policy for fiscal fine-tuning, but with interest rates at 5.25 per cent, the Bank of England has plenty of room to stimulate the economy through monetary policy if it judges it to be necessary.

Some fiscal tightening is already in the pipeline thanks to measures announced in the budget last year. Mr Darling should let that stand and tighten a little further as well – by a squeeze on spending if possible. If the economy really does take a nosedive, any tax rises can always be cancelled before they come into effect in March next year.