IF you always wanted to retire to a former lock-keeper’s cottage on one of Britain’s peaceful canals, the chances of achieving that dream rose considerably after the Chancellor’s Pre-Budget Report (PBR) this week.

In a nation shocked by the Government’s plan to borrow £118bn in the next financial year (2009-10) – three times Alistair Darling’s prediction in March – it was easy to miss a promise to list state-owned assets “with potential for alternative business models”

likely to be sold to raise muchneeded cash.

The Queen Elizabeth II Conference Centre, in Westminster, is beyond small investors – but a British Waterways “canalside property portfolio”

sounds more promising.

Otherwise, boom and bust is back with a vengeance. Mr Darling’s warning of years of austerity to 2015 means even the public sector is no longer immune, with the Institute of Fiscal Studies predicting cutbacks of £37bn in Government spending, starting in 2010-11.

First step, with tax rises looming, must be to use that Cash Mini-ISA allowance lifted to £3,600 in the current financial year.

Ahead of the next base rate cut, likely to be announced within weeks, fixes of five per cent and more, albeit only for a year, are available from Halifax, Wesleyan Bank, and M&S Money.

If the PBR signals a return to a high tax, low growth economy, as some claim, it’s feasible that ISAs will be part of many private sector pension pots, particularly for people nearing retirement – because the money is unlikely to do much better over the next few years in sluggish global stock markets.

Next step – as unemployment soars – might be a payment protection insurance policy to guard mortgage repayments against accident, sickness and unemployment up to a maximum £1,500 a month for a year with cutprice providers such as Paymentcare.

Shane Craig at Paymentcare says a monthly premium of £39.50 covering a monthly mortgage repayment of £1,000 – probably cheaper than the policy from your lender – could be a prudent move if 2009 sees more job losses than this year.

So far as the Chancellor’s main gift – the temporary 2.5 per cent cut in VAT – is concerned, Andrew Hagger at financial website Moneynet.

co.uk says shoppers can top up their saving with a cashback credit card.

American Express platinum offers five per cent back on the first three months while Abbey pays three per cent on supermarket and petrol spending for the first six months.

Geoff Tresman, chairman of Punter Southall Financial Management, with 4,000 private clients and 25,000 in group schemes, says: “My advice to anyone who gets anything from the £20bn Government handout is to pay down debt.

“If you don’t have debt, by all means go out and spend it – although I believe most pensioners who get the one-off £60 bonus (£120 per couple) from January on top of their £10 Christmas bonus will save it.”

Pensioners have also locked in a decent rise – from £90.70 to £95.75 – in state pensions next April, thanks to the five per cent inflation rate recorded in September.

Stephen Noakes, at Lloyds TSB Mortgages, advises a similar defensive strategy for homeowners enjoying sharp falls in tracker rate or standard variable rate (SVR) mortgages.

He says: “Borrowers should address any outstanding debt, such as store or credit cards, starting with those with the highest APRs.

“Then they should set a standing order on pay day to sweep additional cash into a savings account – or they may decide to make overpayments on the mortgage. There might also be a case for switching from an interest-only mortgage to one with an element of capital repayment.”

Amidst the doom and despair, the Chancellor tossed an encouraging titbit to any low-paid workers still able to think about saving.

His Savings Gateway means that for every £1 low earners manage to save, the Government adds an extra 50p to accounts held in banks, building societies, credit unions and the Post Office.

Friendly Societies want to be involved too.

It sounds generous, but beware of “Santa” Darling bearing gifts.

Low-paid workers could find their retirement income significantly affected by means testing – and their careful saving might cancel benefits they would otherwise have collected in their old age.

Life ain’t going to be too much fun in “Austerity Britain”, is it?