A common thread that links the major parties is the need to get the City's money-spinning machine operating again, to return to ‘business as usual'. Labour and the Lib-Dems favour a bit of regulation, and perhaps some clever insurance-type levy on risky operations. The Tories favour light-touch regulation and a balanced budget.

But the Tories are now wobbling and might refrain from immediately moving to budget balance when in Government. Instead of insisting on immediate cuts, they are insisting on an immediate programme setting out future cuts. Why?

For one thing, recent polls show that such cuts are not popular with much of the electorate. For another, big hitters such as the IMF have made it clear that cutting public spending too soon will push Britain into a double dip recession. After all, first-quarter growth in 2010 was only three-tenths of a percent, unemployment (particularly amongst youth) is still rising and---nearly two years after Britain's largest effective devaluation in living memory---export growth is lamentable.

So Cameron and Osborne are busily modifying the party line. What is needed right away, they argue, is not so much immediate spending cuts as a clear programme setting out cuts to be made over the life of the next Parliament. Perhaps too, they add, we need to think about raising taxes (think VAT), about more education and ‘high tech' exports and establishing a ‘Financial Stability Council'.

Since the life of the next Parliament ends in 2015 and the UK is expected on most forecasts to return to moderate growth by 2013, that leaves plenty of room for manoeuvre. Specifically, it means that even if the Conservatives fail to obtain a working majority, they need not worry that the Lib-Dems will force an early election on them---or that even if they do, Cameron and Co. will increase their majority. Remember Clegg and Cable's call for swingeing cuts?

The bottom line is this. By setting out a programme of cuts now, the Tories want to send a clear signal to international finance. The message is not really about Britain losing its credit rating but about the strength of sterling.

What the City most fears is that foreign capital will cease flowing into Britain because of foreigners' perception of currency risk; ie, an ever weakening pound. As the Asian crisis of 1997 demonstrated quite clearly, currency runs are prompted by the herd instinct. Britain's financial sector is still highly leveraged and will become more so as a result of returning to ‘business as usual'. A small run on sterling could bring another round of bank or hedge fund failure, precipitating a much larger run and massive capital flight. Obviously, not a word of this must be said in public, hence the empty phrases about dearer foreign borrowing costs ‘crowding out' domestic investment.

What about the Financial Stability Council? Osborne is wary of handing too much power to Mervyn King who has recently been making uncharacteristic noises about greater BoE prudential regulatory power. Perhaps it is no more than gesture politics, but it reinforces the Tories' central message.

The left is too obsessed with the threat of immediate Tory spending cuts. In reality, there is nothing mysterious about the latest twist in Osbornomics. Despite the occasional nod to rearranged financial regulation and stronger British industry, George Osborne believes that British prosperity depends on the supremacy of financial services. That means getting across the message to international finance that the Tories will insist on minimal regulation and a strong pound, regardless of whether or not they gain a clear majority in May's election.

George Irvin, Research Professor in Development Studies at the University of London, SOAS.