Dan Lewis: There was no alternative, so give them a chance

The new Government's first responsibility will be to restore the public finances to health and do what they can to make the economy grow strongly again. For if the UK is going to keep borrowing increasingly vast sums at a reasonably low rate, ratings agencies and the bond

markets will want to see major action, fast.

It's a tall order and four men are charged with this awesome responsibility; David Cameron, George Osborne, Vince Cable and David Laws. But is what they have agreed to do going to cut the mustard?

No one can envy their starting point. And mostly thanks to the outgoing government, it is a pretty atrocious one. Gazing out across the post-recessionary landscape makes for some grim viewing.

The collapse in tax receipts means we face a budget shortfall of 163bn. The latest quarterly economic growth figure of 0.2 per cent is anaemic. Unemployment is still increasing, up another 53,000 yesterday.

Oh, and one more thing, the eurozone – a major trading partner – is imploding. So don't hope for much of an export-led recovery from there.

For all that, the UK is certainly no Greece, but a brief look at these four men and their plans suggests for now, it will be tough going indeed.

Starting with David Cameron. It's often overlooked that as Prime Minister, Cameron is also First Lord of the Treasury. Constitutionally, the PM still dominates the political economic landscape. The trouble is that gritty economic detail is just not his thing. Arguably, that showed in the TV leaders' debate when he was unable to rebut forcefully Brown's ludicrous charge that cancelling the NI insurance increase was somehow taking money out of the economy and would cause a double-dip recession.

So, unlike say Margaret Thatcher or Gordon Brown, Cameron will most likely revert to the role of a traditional PM, and leave the economy to his Chancellor and his team.

Osborne may be the youngest ever Chancellor, but he has had one of the longest apprenticeships. In opposition, he has been at his most politically effective when offering one tax cut and one non tax increase; inheritance tax and national insurance. The first has been conceded. The second will go ahead, but we now learn that yet another tax increase is on the way – a jump in the capital gains tax to 50 per cent.

That's a real worry. Britain's tax base has been decimated and a large portion of it based on receipts from financial services and property are not coming back.

But the answer is not to tax even more. Instead, Osborne should ask the Treasury to look hard again at all the taxes on the Government's books and work out which ones cost the most to comply with, collect and avoid and what kind of impact they make on economic growth. There really is huge scope for reform here.

He would also do well to beef up the Office for Budget Responsibility. That will give him cover to be more aggressive in spending cuts which – don't believe what you heard in the election – have to be made. News that the LibDems have told the Tories to drop their pledge of increased spending on the NHS will be a welcome relief.

That should be extended to education and international aid. It is

absurd that the Department for International Development will be spending over 200m in India this year alone – a country that can

afford aircraft carriers, nuclear weapons and a space programme.

The new Business Secretary, Vince Cable, comes to the Cabinet table having had a good press throughout the recession. Along with all too few others across the political spectrum, the York-born politician correctly anticipated future woes from unsustainably high public and private sector debt. But understanding and describing a problem are not the same as having a solution.

Here he has been found wanting, playing to some of the anti-financial sector and redistributionist bias of the Left wing of his party.

So it's no bad thing that David Laws, a very bright banker before he went into politics, is the Lib Dem Chief Secretary to the Treasury. He is about as pro-capitalist as any Lib Dem has ever been and that will go some way to reassuring the City. Both of them need to be there to hold the Liberal Democrat party together in government.

Some of the early reaction to this coalition has been excessively negative. My view is that it's foolish to be too judgmental so early on, especially as there wasn't a serious alternative to a coalition. For now, we might as well give them the benefit of the doubt. And we must pray that there are no Black Swans – a high impact, hard to predict and rare event – to blow them off course.

Dan Lewis is chief executive of the Economic Policy Centre.