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Will the chancellor's plans shorten the economic woes?


There is no shortage of advice from both sides of the political divide on what to do about the economy

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There can't be many more challenging jobs than chancellor of the Exchequer, certainly not at the moment. Tourism chief for North Korea might come close, but when you look at the size of the task facing him, who'd be George Osborne?

Consider what's currently sitting in the chancellor's inbox: the biggest public debt crisis since the war, inflation running at near enough 5 percent, consumer confidence levels hovering somewhere between terrible and terminal, uppity coalition partners offering little more than sniping from the sidelines and European counterparts that struggle to agree on anything.

It's no surprise then, that there was little optimism hovering over the chancellor's autumn statement which he delivered in November. Indeed, a cartoon in The Times that day summed up the mood perfectly in the run up, depicting a special adviser urging Osborne to "Start with the gloom - and build up to the doom" in his forecast for the coming year.

In reality, the economic data is throwing up two fundamental questions: how badly has the recovery stalled, and does the chancellor have anything up his sleeve to kick-start growth? Economic indicators across the board – unemployment, growth, consumer confidence, the strength of the pound – suggest there's little room for manoeuvre, and the chancellor reinforced this conviction.

One think tank took the opportunity to apply even more pressure on Osborne: "The gravity of the situation should be the catalyst for profound, structural reforms which may be politically controversial but which would put the economy on a new footing." So don't just save the game, right-of-centre think tank Reform seemed to be telling the chancellor, but change the rules while you're at it.

Of course, there is no shortage of advice from both sides of the political divide. Demos, the left leaning think tank, makes it clear that while it supports a growth agenda, and urges the chancellor to design and promote that, there is a distinction to be drawn between good and bad growth.

According to its research, Demos says that: "In the public's eyes, 'good growth' depends on creating jobs that enable their bills to be paid, but also on issues such as work–life balance, health and housing, among others, which are seen as critical components of good economic performance."

Which begs the question, how can a chancellor meet these needs? In Demos's view, the recipe is simple: create jobs. "The public also see two traditional measures of economic success – jobs and income – as critical to good growth. Where growth in GDP occurs without creating employment, the public would not see this as consistent with good growth. The priority for economic policy is therefore to drive the creation of jobs, particularly in the light of current economic conditions."

In addition to jobs, the Demos study also calls on Osborne to prioritise investment in health and infrastructure. And it was the second of these that the chancellor focused on in his statement, announcing the heavily-trailed infrastructure plan that involved £6bn of spending on roads, public transport, energy and communications projects.

Usually, the spectre of tax and spend is enough to get the right-leaning think tanks frothing at the mouth. However, the depth of the crisis is enough to convince some on the right that there was a need for government action, if not to underwrite investment, but at least to underpin confidence and stability.

Reform emphasises the need to increase the levels of flexibility and dynamism of the UK economy, with an emphasis on productivity.

The issue of regulation – and the need to reduce it, or at least stop adding to it – was shortly to become a cause celebre as David Cameron walked out on negotiations to reform the Lisbon Treaty after proposals to regulate the City were mooted.

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