Analysis: Shades of Margaret Thatcher as Tories gear up for bitter battle with trade unions

AS IF he did not have enough of a challenge already, given the perilous state of the economy, George Osborne sent out a message that he was gearing up for a long and bitter fight with the trade unions.

His cap on public-sector pay rises at 1 per cent after the end of the pay freeze in 2013 will fuel union anger and make for battling and unrest.

On the eve of a national day of strikes, the Chancellor was determined that the public sector must bear its share of the pain that will result from the dismal set of figures outlined yesterday.

Even faced with all his other problems, Osborne has clearly made a political calculation and concluded that he has a good chance of coming out on top in a battle with the unions. Clashes with the public sector are a price he is prepared to pay in order to make inroads into the deficit.

Politically, he will be helped by the strong body of opinion of those within the private sector, who are aghast that taxpayer-funded workers are complaining about increased pension contributions at a time when private retirement funds are so meagre.

If taking on the unions raised the spectre of Margaret Thatcher, there were signs of another former prime minister of a different political hue. The measures designed to alleviate pain were reminiscent of the micro-management of Gordon Brown when he was chancellor.

And in these days of coalition government, there was the question of how Osborne’s plans will play with the Liberal Democrats. The right-wing thread running through his autumn statement and the perception that he is neglecting the environment will stoke Lib Dem discontent

And plans to ease the burden of health and safety laws on small business are also unlikely to go down well with Nick Clegg’s party.

But, as Osborne told the Commons: “We will cut the burden of health and safety rules on small firms because we have a regard for the health and safety of the British economy too.”

The truth is that Osborne has had to shuffle a desperately poor hand of cards.

In the past, he must have hoped that the UK would emerge battered but unbowed from the economic storm before the next general election.

Perhaps he once thought he might even have had some cash to spare for some pre-election giveaways.

Yesterday’s figures mean that plan has now turned to dust.