A balancing act

The Chancellor is right to do so. The relentless focus on public sector cuts and efficiency savings over the past three months, though necessary, has deflected attention away from the need to create new employment opportunities.

The urgency of this task is underlined by yesterday's stubbornly high inflation figures that continue to exceed official projections. This rise in the cost of living will continue to place household finances under considerable strain, particularly if it leads to rail fares, for example, rising by eight per cent.

Yet if interest rates rise, one of the options that is open to policy-setters, it will, potentially, compromise all those people who are mired in debt, and who are only honouring mortgage payments because lending rates have been at an historic low for such a sustained period.

This is why Mr Osborne, and his colleagues, need to proceed carefully. They need to scale back the public sector's excesses – even Alistair Darling, the former Chancellor, now accepts that Labour was not sufficiently robust under Gordon Brown – but it is also important that they keep as many people in work as possible. It's surely self-defeating for the Government to sack people, and then have to pay unemployment benefits to these individuals.

For this reason, there needs to be far more attention paid to policies that actually create jobs – whether they be major infrastructure projects funded by the Exchequer – or schemes that encourage private enterprise.

Mr Osborne now recognises this; his challenge, over the next 100 days, is to implement such an approach while facing up to the complexities, and consequences, of a Comprehensive Spending Review that will be the most challenging ever.