Business is booming. The budget's in the black. Inflation and unemployment are at their lowest levels in decades. All in all, Britain's economy is in such robust shape this fall that even Gordon Brown has been seen to smile.

The 48-year-old Brown is Britain's chancellor of the exchequer--roughly the equivalent of the U.S. treasury secretary and budget director. While charming and amiable in private conversation, he seems to cherish his public image as a stern and cautious policy wonk. Asked once to pick his favorite word, Brown did not hesitate a second before naming his choice: "prudence."

But even the ever prudent Brown is breaking out in boyish grins these days, and it's easy to see why. By some important statistical measures, Britain's economy is in the best shape that anyone can remember.

"It is pretty rosy," said Michael Saunders, an economist at the London branch of the investment banking house Salomon Smith Barney Inc. "Reasonable growth rates, low inflation, great fiscal position, low unemployment, steady wage growth and a boom in capital investment. In terms of the U.K.'s recent economic history, this is as good as it gets."

Just last week, the government reported that the unemployment rate has fallen to 4.2 percent--the lowest since 1980--and inflation has dropped to 1.1 percent, the lowest since 1959.

Consumer confidence is high, and credit card spending is up, offering balm to the retail sector. Even manufacturing, plagued all year by a strong pound that makes British products expensive on world markets, had positive growth in each of the past three months.

In his annual budget message in March, Brown cautiously predicted that the government would run a deficit of about $7 billion this year. But tax revenues have been so high, thanks to the business climate, that current predictions suggest an $8 billion surplus instead.

The steady stream of good news has provided smooth political sailing for Brown's boss, Prime Minister Tony Blair, and the Labor Party government. Gliding along with enviable approval ratings, Blair never misses a chance to use the sparkling economic statistics to bash the chief opposition party, the Conservatives.

The prime minister's favorite motto right now is the assertion that the Labor government "has ended the cycle of Tory boom and bust."

The Conservatives are clearly struggling to find a riposte. This week, the BBC asked the Tory economic spokesman, Francis Maude, to comment on the new inflation and unemployment figures. The strongest criticism Maude could come up with was that Brown almost made a big mistake last year. "Britain came within a whisker of going into a recession," Maude said. But then he conceded that the recession did not happen.

Actually, many economists predicted last year that Britain's economy was heading downward. As it turned out, the economic recovery in East Asia and continued growth in Western Europe, together with low inflation at home, helped produce growth instead.

The British boom has not been evenly distributed. The financial and service industries, centered in London and southeastern England, have seen the biggest growth rates. Manufacturing is still somewhat iffy, despite the good summer. The plight of the agricultural sector is so dire that some farmers are shooting their lambs because the animals cannot be raised at a profit. Those differences mean that the southeast has seen broader prosperity than the industrial north of England or the agricultural regions to the north and west.

Brown's determination to keep government spending down--and thus run up a healthy budget surplus--makes Britain's public infrastructure look grim and shoddy. Public schools, hospitals and transit stations are gloomy, Dickensian structures with leaking ceilings and crumbling stairways. Highways are so crowded that the government contemplates charging a fee for driving into a city. Only the vast and pampered public parks reflect the country's overall wealth, because this garden-loving nation would never stand for second-rate parks.

"The shabby public face of Britain is the downside of that cautious fiscal policy," Saunders said. "Spending on basic maintenance has been low for years."

Still, the economic news has been so good this year that Brown was asked this week to explicate the British boom at the Council of Foreign Relations in New York.

"In Britain's past," he said, "expectations of boom and bust led to . . . a vicious circle of low investment, wage inflation, low growth. . . . The opportunity exists now in Britain for a new virtuous cycle of low inflation, high investment and high and stable levels of growth."

CAPTION: Chancellor of the Exchequer Gordon Brown predicted a $7 billion budget deficit in March, but the latest estimates anticipate a $8 billion surplus.