The world moves Britain's way

The world has moved - and it has moved in this government's direction. That was the message of this weekend's meeting of G20 finance ministers and central bank governors in Korea, and it felt like sweet vindication for George Osborne. Ever since Mr Osborne opposed fiscal stimulus in the autumn of 2008, Gordon Brown had said said that the international community was on their side - and the Conservatives were "in a minority of one". Not any more.

Truth be told, big new stimulus programmes have been off the agenda - almost everywhere - for quite a while. But as recently as April, these same men and women were talking about the need for most governments to sustain the support for the economy that they already had in place. But the statement agreed in Busan on Saturday focuses on the importance of "sustainable public finances" - and the need for countries to take "credible, growth-friendly measures" to achieve that.

The US and the IMF pushed hard for that reference to "growth-friendly". Both are worried about the real economic impact of everyone slashing their deficits in 2011. Looking at movements in world markets today, apparently investors are worried too.

But that was not George Osborne's primary concern as he flew back home. His main concern is, understandably, the tough decisions that he and the government have to make over the next few months - and how to sell them to an electorate that were not given much to go on, on this subject, during the election.

Seen in that context, the G20 statement was extremely helpful - especially the sentence welcoming "recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal institutions". In case you were wondering: that last bit means us.

The prime minister has just given us a flavour of what's to come - we'll have more tomorrow from Mr Osborne and Danny Alexander. What we know already is that this is going to look very different from the closed, Treasury-driven exercises to cut spending that we've seen in the past. As David Cameron said in answering questions - that shouldn't be a surprise. We haven't had an 11% of deficit before, either.

There'll be no more numbers this week. Today and tomorrow are all about process - the Canadian-style "star chamber" to decide on cuts, the structured public debate - on and offline, and the effort to involve as many people as possible in these tough decisions.

Experience elsewhere - not just in Canada but in Sweden and Ireland as well - shows that this is really the only way to do this. You never know, in some areas it could produce some bright ideas for cuts that actually make parts of our public services work better for people than they did before. (See my post "Efficiency swipes".)

But before we get too carried away - consider the the larger, global lesson, of the G20 meeting this weekend. Those ministers haven't stopped talking about fiscal stimulus because the global economy doesn't need it any more. In fact, as US Treasury Secretary Tim Geithner stressed in his remarks, the private-sector recovery in many countries still seems quite fragile - witness the recent figures out of the US.

No, They've stopped talking about stimulus because they don't think the global economy can afford it any more.

Rightly or wrongly, most in the G20 have drawn the lesson from recent bond market ructions in the eurozone that governments, as a group, need to cut borrowing faster than planned over the next few years. That's almost regardless of what happens to growth, although, naturally, the G20 expect the world's central banks to do their part to support the recovery. As I've indicated, the US doesn't quite agree, but given its own deficit numbers. Mr Geithner wasn't in a position to make much of a fuss about it this weekend - at least not in public.

So yes, the message of the G20 was that the world was moving the government's way. But the message was also that the finance ministers of the world's most important economies think that fiscal efforts to support the global economy - in effect - have now reached a dead end.

Given the the enormous weight of public and private debt weighing down on the world's countries, that may be an accurate statement of where we are. But it is a sobering thought for a country - and a government - which will need to rely more than most on strong growth beyond our shores.