Economy

The Office for Budget Responsibility is expected to downgrade the previous government’s growth forecasts. Alistair Darling’s rosy prediction that the economy would grow by 3-3.5 percent in 2011 will be replaced by a conservative estimate of 2-2.5 percent, in line with other independent forecasters. Also, according to the Guardian, the OBR will ‘trim’ the Treasury’s breezy estimates of growth until 2014-15.   There is no guarantee that the OBR’s forecast will be flawless – and the Treasury Select Committee's scrutiny will have to be exhaustive. But George Osborne is bound to the OBR’s figures, rather than the Treasury being bound to a political agenda. Balance and responsibility will be restored to Budget decisions.

I had expected Alistair Darling to have slumped off to spend more time with his memoirs after the election, but here he is, fists aloft, fighting the government. About the only member of the Labour front bench effectively doing so. He has a point. The economy is looking better than expected, not worse - as David Cameron has been pretending. Each new forecast for the deficit seems to give a less ghastly picture. British house prices are on the rebound. And when the Office of Budget Responsibility announces its forecasts on Monday, it is likely to give a better picture than that in Darling's budget. Already Darling is telling the Guardian that he wants "an apology" if this is so.

What is Vince Cable up to? He is on manoeuvres, keeps making attempted power grabs from George Osborne. Barely a week passes without him rattling the cage to which Cameron and Clegg have confined him  - that is, the unwieldy and yet fairly powerless Department for Business, Innovation & Skills. For all its bulk, the department doesn’t really do anything. It has the universities brief, which is important, but it is certainly not an economics department as Cable was pretending last week. “It is a bit like the German economics ministry and the finance ministry,” he claimed. “Two departments, working in parallel.” As if.

George Osborne’s Asia trip has now been rounded off with a meeting of the G20 finance ministers in South Korea and he is now heading back to Britain and his Budget preparations. The trip must be marked up as a success for Osborne. In its communiqué, the meeting implicitly endorsed Osborne’s two major moves since becoming Chancellor, cuts this year and the setting up of the Office of Budgetary Responsibility:  ‘We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions’ No one can doubt that the Tories have comprehensively won the argument for in-year cuts.

David Cameron's speech today was, in many respects, the one he needed to make: the clean-break speech, which trashed Labour's record on the economy while also outlining how the coalition would deliver us to the sunny uplands. As it happens, it was also quite effective: a blend of policy specifics and punchy rhetoric.  And while we'd heard many of those specifics before – corporation tax cuts, reduced regulation, carbon capture, etc. – they cohered here as they rarely have done before. The most earcatching apsect of the speech, though, was the emphasis Cameron placed on government intervention.  Yes, there was a solid core of small state fundamentals.

Recent events in the Eurozone have led a number of commentators to suggest that we are nearing some repeat of the financial crisis that followed the nationalisation of Fannie Mae and Freddie Mac in August 2008 and the subsequent (and consequent) bankruptcy of Lehman's. In my view, the current situation is rather different from that in 2008, but matters could turn out much worse.

The sun is filtering through the garden at 22 Old Queen Street, and a brass band is marching around St James's Park: we're getting the light and the pomp in equal measures for today's Queen's Speech.  As for the actual policy, well, we largely know what it's all about.  There will be proposals for scrapping ID cards, strengthening civil liberties, reforming schools, making the police more accountable, and more.  The emphasis from the government is on handing power back to the people. The question is whether the coalition can make today's positives balance out the age of austerity.  The stock market today provides a gloomy reminder that their biggest challenge is, and will remain, the economy.

I've just read through George Osborne's speech to the CBI annual dinner last night, and there's much in there about free markets and tax cuts that will encourage Tory supporters.  But one passsage seemed a little strange to me: "And on the subject of coalitions, let me be absolutely frank. As a member of the negotiating team, we did consider whether we could try to bluff our way into a minority government. But it was David Cameron’s bold vision and Nick Clegg’s great foresight which saw, before anyone else, that that option would be the greatest compromise of all. A weak, unstable government, risking defeat night after night in Parliament.

David Cameron’s first broadcast interview from Downing Street contained two significant pieces of news. First, George Osborne will commission an independent audit of the public finances and state spending on Monday. I suspect that this audit will reveal that things are even worse than the official figures suggest. The political purpose of this audit will be to provide cover for the necessary cuts, to show that they are necessary because of Labour’s economic mismanagement. I also expect that the new Office of Budgetary Responsibility will provide a new, more cautious set of economic forecasts. The other piece of news was Cameron confirming that the vote on the 55 percent clause will be whipped.

Philip Hammond was quietly brilliant as Shadow Chief Secretary to the Treasury and it would have been a travesty if he was excluded from the Cabinet. Having avoided assuming the mantle of ‘the most hated man in England’, Hammond has been handed the poisoned Transport brief. A popular saying about frying and pans and fires comes to mind as he will tasked with renewing Britain’s congested roads, baleful airports and Victorian railways amid austerity. Still, he could have been sent to Northern Ireland. Hammond’s first announcement has been to confirm George Osborne’s pledge that the £16bn Crossrail project will not be cut.