THE GOOD

1. UK’s commitment to eliminating its deficit remains credible. However, the growth figures that the initial deficit reduction plan was based on now look overly optimistic, which means that cutting the deficit will almost certainly require additional cuts to current expenditure before the next election. But so long as the government commits itself to eliminating the deficit by reducing expenditure – and not threatening growth by raising taxes – we should be able to avoid a Euro-style meltdown.

THE BAD

2. Spending on infrastructure is an accountancy trick. It might boost GDP numbers, but it won’t do much for the real economy – in fact, it might make things worse. A recession is a period where investors reallocate their capital and people reskill to produce things that consumers want to buy. Infrastructure spending delays this, by creating unsustainable demand for skills that the private sector doesn't want. That might make the economy appear to be improving in the short term, but in the long term it gives mixed signals about where people should reskill and move, and makes sustainable recovery even tougher to achieve.

3. The lack of pro-growth tax cuts is worrying. If the last year has proved anything, it is that economic growth won’t come from nowhere. Entrepreneurs are paralysed by employment and business regulation, with high taxes making retirement a more attractive option than reinvestment for many successful businesspeople, and credit markets are reluctant to lend in such a sclerotic business environment. If the Chancellor wants to make the Eurozone crisis into an opportunity for Britain, he should be trying to make Britain the best place in Europe to do business. That means cutting taxes and regulation across the board.

THE UGLY

4. Credit easing is a deeply misguided policy that utterly ignores the lessons of the last decade. Packaging together small business borrowing into a government-backed security gives a false illusion of safety to investors. If and when some of those businesses start to fail en masse, bonds that looked completely safe are revealed to be worthless, creating financial havoc. It’s a re-run of the US subprime mortgage policies that led to the 2008 financial crisis. All credit easing does is set us up for another crash in a few years time.

Dr Madsen Pirie, President of the Adam Smith Institute, adds:

“It is good that 'Plan A' to cut the deficit is now 'Plan A-star,' stressing the importance of growth as well. The measures are small beer compared to the things that could really lead to growth. We must be careful not to tread in Gordon Brown's footsteps, trumpeting small-scale schemes by loud announcements.

What is needed is for government to be serious about removing the obstacles to growth posed by high taxation and over-regulation. Small businesses, which provide two-thirds of all new jobs, want to hear that their tax burdens will fall, and that they will be freed from many of the regulations designed for large firms.”