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George Osborne's solid start

Over recent days I've been critical of the Tory election campaign - of which George Osborne was co-ordinator - and so I'm grateful for the opportunity to praise his first few days as Chancellor...

Screen shot 2010-05-18 at 14.14.41(1) First of all, he has ensured that the Liberal Democrats are involved in the difficult spending decisions that lie ahead. Having David Laws at his right hand means that yellow as well as blue fingerprints will be all over the scissors with which the Government will be making cuts. Tory Cabinet ministers are, nonetheless, in charge of 90% of public spending.

(2) Mr Osborne made a strong start yesterday with the commitment to allocate £6bn of economies across Whitehall departments by next Monday. That sort of clarity is exactly what markets need. He also gave us the date for the emergency budget; 20th 22nd June. The Coalition has not lessened the impetus towards deficit control.

(3) It wasn't as dramatic as Bank of England independence but the Chancellor's establishment of the Office of Budget Responsibility will begin to restore trust to budgetary and growth forecasts. The OBR's first report will also provide an independent indictment of the Labour legacy.

(4) Despite earlier reports Osborne - not the populist Cable - will be in charge of banking reform. Today's Independent has more on this.

(5) Social conservatism could have been a principal casualty of the Coalition with the socially liberal Liberal Democrats. But much has been retained because of IDS' appointment at Work & Pensions. Moreover, Osborne secured an agreement from Clegg that his MPs will abstain on the married couples' tax allowance. That will mean it will almost certainly pass. It is interesting that the Tory negotiating team fought for this (cheaper) pledge rather than the inheritance tax pledge (which has been long grassed).

Massive challenges lie ahead of course. Today Osborne is in Europe to discuss regulation of the hedge fund industry (see Mark Field's analysis here). After David Davis' intervention of yesterday on the 55% rule another big beast - John Redwood - has today warned the Chancellor about the proposed increase in Capital Gains Tax. Mr Redwood, working with other leading Tories such as Lord (Michael) Forsyth - seeks different treatment of capital gains on short and long-term investments. The Chancellor also faces pressure from Vince Cable and industrialists to phase in the simplification of corporation tax.

Osborne is only at the bottom of the mountain (or should that be top of the valley?). Overall, however, a good start.

Tim Montgomerie

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