Political tradition in this country makes it almost obligatory for incoming governments to issue doom-laden statements about the state of the economy, having had time to “study the books” left by the previous administration.
It has hardly proved necessary on this occasion for David Cameron to huff and puff about the unexpectedly dreadful state of the economy he has inherited from his predecessors. The General Election was fought with a gloomy subtext of the unprecedented measures the victors would have to take to reduce government debt, which by any reckoning is eye-wateringly high and must be cut.
If anything, it is becoming clear that the economy is not in quite such a dreadful state as has been suggested. That is not to say we are out of the mire, not by a long way, but tentative signs of recovery are in place and even the implosion of the euro seems less likely now than was the case a few weeks ago.
It is against this backdrop that the Chancellor, George Osborne, will present one of the most important Budgets since 1945. His challenge is simply put, but rather more difficult to achieve: to nurture economic recovery while putting in place plans to repay debt as quickly as possible.
Add to that a requirement to keep inflation under control while interest rates remain at an historic low while keeping the pound at the right level to boost exports, and it is clear that Mr Osborne has his work cut out.
The coalition government has stated its intention to protect the most vulnerable members of society from public spending cuts, a promise that will attract support from most people. A glance at the state of the West Midlands economy, however, indicates the huge task facing the new Government if its economic medicine is to be regarded as fair.
A Centre for Cities report sets out the latest instalment in years of failure as this region continues to slip further towards the economic output basement. For all the talk – and how much talk there has been – of a vibrant regional development agency, a city region board, a council leaders’ board and partnerships and quangos too numerous to mention, the stark fact is that the West Midlands failed to cash in when the good times were with us and, as a result, is saddled with some of the highest unemployment rates anywhere in the country just at a time when public and private sector investment is likely to plummet. This is not a good place in which to be.
Some of Mr Osborne’s thinking is already clear. An increase in the VAT rate, probably to 20 per cent but perhaps even higher, is seen rightly as the fairest way of spreading the misery while having the ability to raise large sums of money quickly.
Local councils are already receiving letters informing them of significant budget cuts, while a similar pattern is being repeated throughout the public sector. Although this is inevitable and will be welcomed by those who view local government with disdain, there are predictable consequences when cutting the budgets of local councils who, in any town or city, are likely to be the single largest employer. Birmingham City Council shed almost 2,000 jobs last year, has pretty much imposed a recruitment freeze, and could easily strip out a further 10,000 jobs over the next four or five years. Local authorities across the West Midlands are drawing up similar plans to cut costs.
The problem local government has, fairly or not, is that town halls are generally regarded as fair game by sceptical council tax payers who have viewed with astonishment the merry-go-round of creative and highly expensive job creation over many years, combined with gold-plated final salary pension schemes.
Public sector pensions must surely disappear in their present form if Mr Osborne is at all interested in retaining the confidence of private sector employers up and down the land who have had to make similarly difficult decisions in recent years.
For all of the tinkering around the edges and the populist cost-cutting measures he may introduce, however, the Chancellor’s central Budget message is likely to remain unremittingly grim. George Osborne must somehow pull off the unlikely political trick of making the case for the forthcoming austerity years while at the same time preventing Britain from slipping back into recession, or even a far more serious slump.