Who would want to be George Osborne today?
Cutting Britain’s deficit and encouraging economic growth have proven to be more difficult than expected.
And while it’s unclear to what extent the failure of the eurozone is holding Britain back, there’s no doubt that turmoil in the EU is a major danger to the UK.
Dire predictions about countries like Greece or Italy defaulting, or the contagion taking hold in Spain or France, have not yet come true – although Spain does look fragile.
However, uncertainty about the economic future of our major trading partners has understandably made British businesses more cautious.
If the worst does happen on the Continent, there is little any government could do to prevent the UK economy being affected.
It’s important to remember that the country is not in a recession, although that word is bandied around. The economy is growing, albeit more slowly than many people would like.
But Mr Osborne faces two major challenges. The first is to get unemployment down, and the second is to reduce Britain’s deficit to the extent that the nation feels the pain has been worth it – and perhaps even to hold out the hope that taxes may be cut, to offset the fall in living standards so many working people have experienced.
He must do this while maintaining confidence in the UK economy on markets worldwide. As things stand, the interest rate on UK government bonds – effectively the price Britain must pay to borrow – is relatively low. By contrast, governments in Portugal, Ireland, Italy or Spain need to pay much higher rates of interest in order to borrow.
It’s tempting to bemoan the influence of the money markets, but their importance is a result of the fact that even before the credit crunch, the UK’s public finances were based around borrowing. The Treasury spent significantly more than it received in taxes as a matter of policy, even when times were good.
Labour claims that it would get the economy growing more quickly, and Ed Balls, the Shadow Chancellor, is pushing a “five point plan” to save the economy, including building more homes, bringing forward long-term infrastructure schemes and offering firms a one-year National Insurance tax break.
But despite attempts to create dividing lines, there’s no real disagreement about the benefits of pumping money into the economy at the present time – and, in particular, of making it easier and cheaper for firms to employ more staff.
The only bone of contention is Labour’s proposed bank tax, which would apparently raise about £2 billion by taxing bankers’ bonuses.
It’s hard to think of a more popular cause than making bankers suffer, but the Government’s alternative bank levy, charged to bank balance sheets, raises about £2.5 billion a year, so the parties aren’t too far apart.
What has become clear in the lead-up to Mr Osborne’s autumn statement is that he is desperate to find more sources of funding to pay for infrastructure – whether that means doing a deal with pension fund managers or charging drivers to use toll roads.
Nobody should imagine, however, that the Government can simply borrow even more money than it already does, and use that to pay for a recovery. Excessive debt, particularly in parts of the EU, helped to create this mess. It’s not going to get us out of it.