Anxious wait for weak nation

THE patient may have come out of intensive care but she remains on the critical list. Britain has moved on from the daily economic catastrophes of two years ago but there is still great uncertainty about the nature of the recovery.

The official forecasts published yesterday underline the fact that, for all the concern triggered by George Osborne's austerity Budget, the cuts have only just begun to feed through.

Central to Britain's chances of getting back on its feet is the scale of job cuts expected over the next year. The estimate from the Office for Budget Responsibility (OBR) that public sector redundancies will fall to 330,000 from 490,000 is a significant boost. Of course, it remains a huge contraction and one that will hang over the head of so many workers, but it does provide a modest sense of hope for the long-term.

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Less clear, perhaps, is the chance of maintaining economic growth. There is plenty of nasty medicine, such as the rise in VAT to 20 per cent, still to come. For this reason, and because it has to make broad assumptions about the success of the private sector, predictions made by the OBR – set up after fears Gordon Brown cajoled officials into providing too rosy a view of Britain's prospects – can only ever be informed estimates. If GDP increases by 1.8 per cent this year, as forecast, then that would mark a major step forward after the longest and deepest post-war recession.

To improve the chances of this happening, of course, high street banks need to lend more, despite their self-justifying – and, in some cases, belated – claims to be acting prudently. Their failure to do so has held back Britain's recovery, particularly for our vital small businesses.

Mr Osborne's confidence of avoiding a double-dip recession is not shared so wholeheartedly outside the Treasury but, so far at least, he has not been proved wrong. Reforming corporate tax, as announced yesterday, can play a part in this, if it is simplified and providing major employers pay their fair share. Doing so would mark another step for Britain on the road to the elusive goal of long-term and sustainable prosperity.