The Guardian's Larry Elliott writes that few Chancellors in the history of UK politics have taken up the seals of office at such a tender age or faced such a baptism of fire as George Osborne." (external website). Meanwhile, over on FT.com, John Kay states that "with the election over, the phoney debate about British public finances is also over" (external website).
The coming weeks will see the new coalition Government forced to declare its position on the long-deferred tough decisions on what is to be done to shore up the UK's weak economic recovery, and to tackle the record budget deficit.
The CBI and the British Chambers of Commmerce (BCC) have both issued calls for prompt, decisive action on the economy (external website).
Here is a quick summary of what is known (or believed to be known) so far:
- We can expect to see Osborne deliver a new Budget within the next 50 days. Presumably this means that we can pencil in a likely date for the second 2010 Budget for late June or early July.
- The Conservative election campaign promises of £6 billion worth of public spending cuts in 2010 still stand (external website), according to the BBC's Robert Peston. Peston says: "The £6bn of additional spending cuts promised by the Tories will stand, unless the economy were to dramatically weaken. A well-placed source said to me that the £6bn wasn't economically important enough to be a stumbling block for the Lib Dems."
- There will be a phased introduction of the Liberal Democrats' proposed increase of the tax-free allowance on income tax to £10,000.
- The fate of Tory plans to reverse Labour's planned national insurance increases for 2011 - subject of much heated discussion during the election campaign - is less clear. The Guardian reports that the increase will indeed be reversed (external website). The Times, however, reports the opposite message (external website). It says that "[T]he planned national insurance rise for employees will go ahead, despite a Tory pledge to ditch that part of what they called 'Labour's jobs tax'." The BBC's Stephanie Flanders presents a third take on what we can expect to see on national insurance (external website), meanwhile, reports that the new Government "are going to only raise the employers' threshold - and use the money saved to rasie the basic income tax threshold instead".
- A 20% VAT rate is inevitable (external website), according to John Kay on FT.com.
- It appears likely that both Prime Minister Cameron and Deputy Prime Minister Nick Clegg will display a similar hardline stance on trade unions. This is likely to be put to the test over the coming months, with flashpoints likely to include the immediate prospect of strike action from BA cabin crews, and seemingly inevitable public sector strike action in response to planned public spending cuts. Cameron stated at the start of the year that he would be tough on the unions. In a recent Guardian interview, Clegg said that he had developed some degree of sympathy with Margaret Thatcher's position on trade unions (external website), that "her victory over a vested interest, the trade unions, was immensely significant".
The scale of the economic challenge inherited by the new coalition Government cannot be understated. John Kay provides a neat overview of the complexity of the situation on FT.com (external website). Kay argues that the underlying structural problems affecting the UK economy cannot be resolved easily, and that eliminating public sector wastage is not the simple matter that the election campaign rhetoric suggested.
Leaked comments from Bank of England governor Mervyn King in the run-up to the election suggested that victory in the 2010 general election could prove a poisoned chalice (external website). US economist David Hale reports that King privately told him that "whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be."
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