In defence of George Osborne

So this morning's revised official figures for fourth-quarter growth in the British economy were slightly upwards – 0.3% instead of the 0.1% first reported – and not down, as the Guardian half-predicted in a moment of uncharacteristic gloom overnight.

It offers a breathing space for the government but also for the Tories, whose economic strategy was, until that 0.1% figure surfaced, based on a more confident recovery by the time they expect to take office on 7 May.

But how much of a breathing space, and for how long? The economy has behaved rather like the weather since 1 January, the exceptionally cold weeks dampening output and consumption, the experts seem to think.

It is quite possible that the first-quarter figures for 2010 – expected in the closing days of the election campaign – will see the economy fall back into negative growth or bump along on the bottom amid all the uncertainty at home and abroad. Who can say what the dollar, euro, sterling exchange rates might look by then?

Yet George Osborne's Mais Lecture this week, which I was reading yesterday when interrupted by Nigel Farage MEP, still lays great stress on cutting the UK's huge debt mountain sooner than Alistair Darling and Gordon Brown think wise when it is public money that is keeping the economy pumping.

Having now completed the lecture, I am delighted to say there's plenty of good stuff in it, along with the usual half-truths and omissions.

Never mind. There is probably less dividing the shadow chancellor from the real one in No 11 (the ex-chancellor in No 10 may be a different matter) than either would have the voters believe. Good. We all have to live here (most of us anyway), whoever is running the country.

"Where disagreements remain is on the details of the timing and the pace of deficit reduction," Osborne writes, before adding: "A credible plan is not really credible unless you're prepared to make a start on it this year."

Well, up to a point, Lord Copper. Most of the clever economic people – the ones who posted their letters to the FT, not to the Sunday Times, where the Jeremy Clarkson school of economic management prevails – accept the need for credible plans.

But they doubt whether sharp and early cuts would do more than push us all further into a downward spiral: low growth, low tax revenues, more borrowing, higher interest rates, deeper debt, etc.

Osborne suggests the opposite is the case – that unless a new government shows real determination to tackle the accumulated debt, doubled from 40%-ish of GDP since the banking crisis, markets will lose confidence, sterling (which fell against the dollar yesterday) will plummet and lenders will be reluctant to finance UK borrowing except at punitive rates.

Ah, but the private sector – individual and corporate – is scaling down its debts and improving its savings after 15 years of bingeing at a startling rate.

If the government does the same, we can only go further downhill. Thank goodness there is someone willing to borrow that money and spend some of it to keep most of us warm and working: the government.

Osborne cites the ex-IMF Harvard economist Ken Rogoff (famous for his spat with the ex-World Bank Nobel laureate Joseph Stiglitz) as warning against the dead hand of excessive debt, public and private, and its ability to generate fresh crises as sovereign debt (ie countries, Greece, Iceland or the UK) goes belly up.

I'm sure that's right, too – we live in scary times. But Osborne omits to mention that Rogoff is also on record, certainly as recently as December 2008, as suggesting that one way to tackle debt is via what he called, in a Guardian article, "a burst of moderate inflation".

By that, he means 6% for two years, while admitting that the genie is hard to get back into the bottle – as someone his age should know.

He's right about the inflation, of course, though policymakers don't like to admit it and Osborne was sternly against it this week. It is the debtor's friend and the saver's foe. At my age, we call savers "pensioners".

I am not one of those who thinks Osborne is a 39-year-old teenage hooligan who should not be allowed out without his mum, although those wild siblings who have been in the news lately are another matter.

Ye, he's a bit of a Flash Harry, a bit fly. But I instinctively like him and, unlike much of the City and the FT crowd, think he'll be smart enough to manage the burdens of that fearsome job when the big day comes and to adapt to the realities he uncovers (ritual moment) when he "opens the books" and finds it's all worse than he suspected (it always is).

And he will have Uncle Ken Clarke to turn to for advice.

Much of Osborne's critique of Brown's stewardship of the Treasury is correct. There were flaws in Brown's three-way model of bank regulation (as in pretty well everyone else's model); he did debauch his ex-girlfriend Prudence and his own "golden rule" on the balance between tax and expenditure over the economic cycle.

Alas, the Tories were even more hopeless in their economic analysis for most of the period – including Osborne himself, who has been the shadow chancellor (the best since 1997) for five long years, poor boy.

Vincent Cable was the man warning against excessive debt and slack regulation, not Osborne.

Osborne has plans to rectify Brown's mistakes, including an independent Office for Budget Responsibility, one of those nasty quangos that rightwing thinktanks always want to see culled, but rarely are. It sounds a good experiment to me.

The Treasury's cheekie chappie chief secretary, Liam Byrne, was unleashed in midweek to rubbish Osbo's Mais Lecture. Withdrawing support for the recovery too soon will jeopardise it, he said, citing top City sources.

Well, top City sources are like top economists: honest men and women can disagree, as they do over the splitting up of the big banks into their respectable and hooligan wings, savers and gamblers. Mervyn King leans towards the split (so does Osborne), Darling and the Treasury lean against. Neither view is a crime, merely a disappointment.

What will happen when Osborne moves in to No 11? He will not be so high-minded as Barack Obama and refrain from blaming his predecessors for the mess.

He will, as Liam Byrne protests, make all sorts of nasty cuts that generate masochistic headlines from overpaid Fleet Street types, headlines that appease feather-brained market sentiment.

But I doubt he'll really do all the stern and fearsome things he currently says he will, not when he's safely through the door and having a cup of tea with Sir Humphrey. "Never believe your own press releases" is always sensible advice.

I know for a fact that Master George does not believe all of his. "Well done for being the only political editor not to take seriously my press release last week," he once told me with a fatherly pat on the shoulder.

I was amused by his condescension at the time, and take comfort from it now.