Yes, it's time to cut. But let's not be hasty

Now that general election fever has subsided and David Cameron's new government has taken office, ministers will need to get to grips quickly with their new briefs and shift gear from debating to implementing policy.

In the business context, taking urgent steps to stabilise the market and begin dealing with our enormous budget deficit are obviously essential. Looking ahead, other key economic-related issues will also need to be addressed including our relationship with Europe.

In terms of the budget deficit, it seems certain that we are in for an unpleasant period of tax rises and public expenditure cuts, although the exact figures remain to be determined. If it had not been for the timing of the election, we would have already begun taking action - we have just been delaying the inevitable. However, given the rather anaemic economic growth we have witnessed over the past two quarters, in their haste to be seen to be acting decisively, our new leaders must be careful not to send us straight back into recession.

In seeking support for the difficult measures which lie ahead, the government should also pursue as broad a consensus as possible. In doing so, it should avoid the temptation to look for scapegoats. Whilst it would be hard to argue that the banking sector does not bear at least some responsibility for the financial crisis and should not be regarded as immune from reform, the City has a key role to play in helping to get us back onto a path of sustained economic growth. Advocating policies which enable London to retain its position as the leading global financial centre are therefore essential.

The approach of the new government to Europe will also be crucial. Given how previous elections were dominated by issues such as saving the pound, it is perhaps surprising how little interest Europe provoked in the most recent one. This is particularly so given the Greek financial crisis and the fears that it may spread to Portugal, Italy and Spain.

Whilst it may be tempting to say "we told you so" as regards the euro, it would be wiser to take note of the fact that the EU is our largest trading partner and so the economic failure of other member states is likely to have an adverse impact upon the UK economy as well.

The new government is facing almost unprecedented economic challenges. It is important that it gets the right principles in place for meeting them from the start.

Jonathan Morris is a partner at the international law firm Berwin Leighton Paisner LLP

    Last updated: 11:13am, May 13 2010