The British chancellor, Mr Gordon Brown, has shown a talent for matching political shrewdness and stable economic management during his term in office. The economy has performed solidly in recent years, avoiding the slump that hit the major euro zone countries.
The traditional "stop-go" cycle, which bedevilled the British economy for many years, has been replaced by a more stable performance.
Framing yesterday's Budget, likely to be the penultimate one before the next general election, was particularly tricky for the chancellor. A significant shortfall in tax revenues left limited scope to improve public services. Yet pushing up taxes so close to an election would have carried clear political dangers.
In the event, Mr Brown took a a fairly minimalist approach. He avoided any major increases in taxes, pushing up the "old reliables" by a few pence, but avoiding any mention of income tax in his speech to the Commons. However, weak tax revenues have forced the chancellor to trim his sails on public expenditure. He has said that public spending growth will have to be halved from its current level of 5 per cent to 2.5 per cent, to bring it into line with lacklustre tax revenues.
Mr Brown aims to slow spending growth by cutting public sector numbers, rather than reducing resources to front-line services. In taking this approach he is claiming that cuts in "administrative costs" and more efficiency in the delivery of public services can save money, while not affecting front-line services in areas such as health and education. The British public, already dissatisfied with service provision in many areas, will take an understandably sceptical view of this commitment. And they will also note the Conservative party warning that tax increases are now inevitable to lower borrowing if Labour gets a third term. In truth, whoever takes power after the next election is likely to have to rein in spending sharply or push up taxes to keep borrowing in check.
For the Republic's economy, solid economic growth in the economy of our major trading partner is clearly in our interest. Market analysts believe that the chancellor's prediction of 3-3.5 per cent economic growth is reasonably realistic. The "steady-as-she goes" budget should also underpin sterling on the foreign currency markets. Had the British currency maintained its traditional link with the US dollar and fallen in tandem with it against the euro over the past year, this would have created considerable difficulties for many Irish companies.
Concerns about sterling's movements against the euro would, of course, disappear if Britain joined the single currency. It is now clear that a referendum, if it comes, will not be held until after the next election.
But by promising to re-examine the issue next year, Mr Brown has left open the possibility of a move early in the next parliament. In the meantime, however, the impact of the spending slowdown on public services looks set to be the key economic issue in the run-up to the next election.