The pound rose against the dollar to touch $1.50 with an end to the political uncertainty which has dogged the UK in recent weeks. After frantic political comings and goings, David Cameron is head of a Con-Lib coalition government – the first such arrangement since World War II.

After many decades in which the Lib Dems, and their Liberal predecessors, played no significant part in government, almost half the parliamentary party looks set to rise to ministerial rank, with Nick Clegg as Deputy Prime minister. The new coalition partners look personally compatible, with one observer pointing out that many of the men at the top of both parties were educated at either Eton or Westminster – perhaps the UK’s grandest public schools. And there’s a fair smattering of ex-City bankers and economists in the upper echelons of the Lib Dems too, which may prove helpful. But whatever the personal chemistry, Cameron, Clegg and their allies have the task of reconciling their different views of economic and tax policy.

Perhaps the scale of the challenges facing the new government could bind them together in adversity.

Companies, economic analysts and the rest of us will be looking for detail on how the new government will tackle a deficit of £163 million – still enormous, if not quite so eye watering as once predicted. The planned emergency budget should give us some answers. The Lib Dems look to have acceded to the Tories’ plan to begin to cut spending immediately, by up to £6billion in the first year – with the proviso that the recovery shouldn’t be damaged. It may be that a coalition government will command wider acceptance in the country for austerity measures which are bound to cause pain in many quarters. There was speculation that popular Lib Dem Vince Cable would be appointed Chief Secretary to the Treasury – or ‘minister of cuts’ – to take some of the flack for the Tories. But it seems he will have a job looking after business and banks.

On personal taxation the Tories have given ground on the Lib Dem plans to raise the threshold of income tax to £10,000 from £6,475. This will be a long term goal to be achieved in steps: it could cost £17 billion. This will be paid for partly by not putting into effect plans to raise the threshold for employee national insurance, and by increasing capital gains tax in certain areas. The Tories pledge to raise the threshold of inheritance tax £1 million will also be put on hold.

Ministers, and the rest of us, will hope that recent signs of economic growth will continue. During the election campaign, David Cameron began to stress the contribution an expanding economy (as distinct from cuts) could make to reducing the deficit. Again the outlook for growth – and therefore private-sector jobs – doesn’t seem quite as bleak as it once did. Many families will be hoping for a continuation of the low interest rates which have seen their mortgage payments reduced during the recession. Perhaps the least controversial part of Gordon Brown’s legacy is that such decisions now lie with the Bank of England.

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