George Osborne: a time to shine like no other.

2012 will be a memorable year for most of the UK, but for George Osborne it may be one he won’t forget too soon.

The Chancellor of the Exchequer cuts an acerbic taste with both Opposition politicians and much of the wider public. After the disaster of the spring budget that brought on headlines on pasty, caravan and church taxes, not to mention the entire ‘omnishambles’, Osborne knew  that this budget was not only important to this government, but also his reputation as a politician.

We are now beyond the half-way mark of the Coalition Government and within the next two years, the general public will start to be make decisions on whether this Government is the right choice to lead the country into the next Parliament.

Osborne, no longer the Conservative’s chief electoral strategist but still a key player within Tory HQ, will know this more than anybody.

For too long, the Tories have relied on a cheap shot of blaming the Labour Government for frivolity and economic mismanagement, yet in recent months have been undermined by some of their own and wider economic indicators. Today, extending from David Cameron’s speech at the Conservative Party Conference marks a side step away.

The Conservatives will go into this election pushing the line that ‘things have been tough, much tougher than we anticipated, but we’re moving in the right direction’. A triple-dip-recession may be inevitable, particularly with the UK’s biggest export market, the Euro zone, expected to contract further. Yet, you can hear the calls are starting to get louder on how things wouldn’t be much different under a Labour Government. 

Increasing the tax-allowance, cutting welfare spending as well new infrastructure projects will go down well with the public. Especially the decision to cut the planned 3p rise in fuel duty, something backed by The Sun newspaper. As well as the more macro initiatives to help businesses, big and small.

It’s more than likely we will see further politicking over the next couple years, maybe an initiative to claw back powers from the EU (a referendum?) and new measures to tackle youth unemployment. Both of which are serious vote winners and of concern to the current government.

Ed Balls may have been flustered as he delivered an awkward response, but no doubt he will get his teeth into the detail over the next day or so. As Osborne learnt on his last budgetary outing, the little things tend to matter and he will be more than cautious.

Osborne over the past week has introduced two new and highly proven advisors into his team and no doubt will feel a little sharper in the long run, but he knows that if he gets it right he could be looking at a majority government, get it wrong and his reputation will be tarnished forever.

UK Economy: Where to next?

What a fine mess we have got ourselves into. Today, Britain became the latest country to return to recession after figures revealed that the British economy shrunk by 0.2% between January and March this year. After months of commentary asking whether Britain would face a double-dip recession, the Chancellor George Osborne will now face a brutal bombardment to whether his plans are working.

The belief in the Treasury was that growth would not be easy to come by, the independent Office for Budget Responsibility (OBR) forecast growth at 0.8 per cent in 2012 and 2.1 per cent in 2013. The original figures were far more hopeful.

The admission that the target to wipe out the budget deficit within this Parliament would not be fulfilled only made the Chancellor and his Treasury team more resolute. Whilst America has seen a healthy return to growth, Britain has been undermined by the uncertainty caused by the debt crisis within the Euro zone. The bite of austerity would continue for at least another two years into the next Parliament.

Ironically, as these harsher conditions have ensued, the government debt is actually increasing. The loss in tax revenues has meant the Coalition will increase national debt to around £1.4 trillion by the end of this Parliament. So whilst the budget deficit may eventually be eradicated, there will still be a long term national debt burden for future generations to deal with. Economists are still uncertain of the long term effects of low interest rates combined with tranches of quantitative easing.

So was the Labour shadow chancellor Ed Balls correct? Was the coalition government cutting ‘too far and too fast’? It appears now that the coalition’s strategy is running at the same timescale as former Labour chancellor Alastair Darling expected it to before the last general election. According to Mr Balls the coalition has made the cuts but created no growth.

However, despite the poor headlines for the Chancellor in recent weeks, it is unlikely to shake him and his Liberal Democrat partners. Mr Balls has been vociferous, yet despite his so-called ‘five point plan’ he is yet to suggest anything of substance. The double-dip may actually force pressure on the Labour treasury team to announce some of their ideas, a stage which may get them caught out.

The previous set of employment figures showed that for the first times there were more jobs created in the private sector than lost in the public sector, a trend that Mr Osborne can only hope to continue. Today’s figures if anything are more likely to make the Chancellor ignore calls from the opposite benches and look towards greater market reforms from the right. As chief strategist of the Conservative party, be certain it will not be something he is willing to get wrong.