In May next year, George Osborne will have been shadow chancellor for five years, which is longer than Gordon Brown spent in the role. Osborne became an MP in 2001; before that, he spent seven years as an aide and speechwriter. He may be young - just 38 - but he is an experienced career politician. It is accepted that he is smart and politically savvy, that he has had plenty of time to master his brief and is an instinctive foreign policy hawk and fiscal conservative. Yet it is surprising to discover, canvassing a wide range of people in the financial world, that in spite of their Tory sympathies, many have grave worries about the chancellor-in-waiting.
George Gideon Oliver Osborne (he changed his given name from Gideon as a teenager) has a credibility problem. It encompasses everything from his age, inexperience and understanding of economics to doubts about his policy vision and his desire to put politics before sound finance, such as his repeated headline-grabbing denunciation of City bonuses. Both Labour and the Liberal Democrats have identified Osborne as a potential weak link on the Tory front bench, at a time when anxiety about the severity of the recession and the parlous state of the public finances is paramount, the pre-Budget report is looming and there is talk of a hung parliament.
Some say, in all seriousness, that the problem starts with his appearance. "George looks so young!" says one banker. "It would help if he were fatter and balder," says another, only half-joking. "It may sound shallow," says a veteran City lobbyist, "but practically everyone I talk to raises it with me." There is anecdotal evidence that Osborne has worked on his gravitas. Commons watchers say he has received coaching to deepen his voice and slow his delivery.
Few wanted to go on the record with their criticisms of Osborne, but the views of David Buik, senior analyst at the City brokers BGC Partners, are typical of what I was told. "I find it quite extraordinary, however delightful he may be, that his only experience, in terms of business, industry or commerce, has been as a speechwriter at Tory Central Office and that he should be the chosen person to be the next chancellor of the exchequer. I know he's a quick learner, but it's frightening. And I say this as an obsessed Conservative . . . I haven't got a bad word to say about him [as a person]. But you have got to have some experience of life."
Stephen Greenhalgh, the Tory leader of Hammersmith and Fulham Council, in west London, and an influential figure in the property world, said as much on 26 November. He let slip that most of the shadow cabinet "haven't run a piss-up in a brewery", and singled out the man who is due to be "running the finances of the nation".
The absurd holiday encounter with Peter Mandelson in Corfu last year still resonates for similar reasons. The episode showed the shadow chancellor is well connected, with an admirable international contacts book. He is a regular at the World Economic Forum in Davos and a member of the secretive Bilderberg Group. But the events in Corfu and their aftermath also demonstrated a worrying naivety: would-be chancellors should not be seen to leak malicious gossip to the media, or to spend too much time on yachts with mysterious foreign billionaires.
Osborne's private wealth worries some in the City, too. It is hardly the fault of the future Sir George Osborne that he is the heir to a baronetcy that dates back to 1629, nor that he has a 15 per cent stake in his family's wallpaper and fabrics firm, Osborne & Little, which is worth in the region of £15m. Indeed, he says the family firm gives him an understanding of the challenges faced by any business. But he also knows that such inherited wealth could be used against him, particularly when the Commons has been investigating his mortgage expenses. Intriguingly, in his entry to Who's Who, he no longer mentions his club memberships at the privileged Beefsteak and Cheshire Pitt, which he included when he was first made an MP.
The issue of age and experience again crops up when City people look at Osborne's small team of around a dozen at Tory HQ. His chief of staff, Matthew Hancock, formerly of the Bank of England, is in his early thirties, while his economic adviser, Rupert Harrison, is younger. Eleanor Shawcross, a former management consultant who is credited as playing a central role on City policy, is 25. It is true that many of Gordon Brown's team were of a similar age in 1997, but the only senior older figure in Osborne's office is the former UBS banker James Sassoon, who works three days a week.
The appointment in January of the former chancellor Kenneth Clarke, now 69, as shadow business secretary was a tacit acknowledgement that Osborne's team lacked authority. Similarly, the Tories launched an "economic recovery committee" in February, with experienced retired bankers such as the former Lloyds chairman Brian Pitman and the former Barclays chairman Peter Middleton, as well as the Next chief executive, Simon Wolfson.
Yet one respected City figure, who has had recent talks with Osborne, argues that the shadow chancellor hasn't surrounded himself with many strong economic advisers. Tory insiders are keen to refute such accusations. They insist they receive regular informal advice from experts, citing Sarah Hogg, the 3i chairman; the Harvard professor Kenneth Rogoff (though he is based in America); and the former Bank of England grandee Alan Budd. The Osborne camp stresses that it listens to the City, talking to everyone from Michael Spencer, the party treasurer and founder of the inter-dealer broker Icap, to the Conservative City Circle networking club. There is input from some of the significant donors to Osborne's office, such as the hedge-fund bosses Michael Hintze of CQS and Hugh Sloane of Sloane Robinson.
Still, doubts persist about Osborne's larger understanding of economics, even if few question his intelligence or political skills. The Tory hard core has adored him since his call to raise the inheritance-tax threshold to £1m at the 2007 party conference. As Vince Cable, the Liberal Democrat Treasury spokesman, puts it in his new book, Free Radical: "I have never rated George's understanding of financial and economic matters, but he is a political operator of some substance."
Yet politics is not what impresses the City. "From what he says, I think he's got a relatively poor understanding of the macro [economic picture]," one banker who has regular contact with the shadow chancellor's office told me. Osborne certainly failed to offer a convincing argument about what he would have done with Northern Rock in 2007 (he opposed nationalisation) or how he would have saved the Royal Bank of Scotland and Lloyds a year ago. Critics say he was slow to grasp the severity of the spending crisis after the bank bailouts.
As Osborne now talks about deep spending cuts and possible tax rises to bring down the deficit sooner than Labour, the City is anxious for details. He used his autumn conference speech to put some flesh on the bones. Freezing public-sector pay and reducing middle-class benefits such as tax credits could save £7bn, and he plans to raise the state pension age. But as Robert Chote, director of the independent Institute for Fiscal Studies, says: "Seven billion pounds isn't peanuts, but it is a relatively small proportion of a hole that is estimated at £90bn."
For that reason, attention is beginning to focus on the likely contents of Osborne's emergency Budget, promised within the first 50 days of a new Conservative government. Chote says it is important not to rush through changes, particularly as we are likely to be already two months in to a new financial year, something Osborne himself has acknowledged. "If I were advising them," Chote notes, "I would say it's about making the right decisions for the spending review period [in later years] rather than seeking savings in the first year."
There are those, such as David Blanchflower, a former member of the Bank of England's Monetary Policy Committee, who warn that Osborne's determination to cut spending too soon would prevent recovery. Even natural allies want reassurance that he has a coherent plan of action. "We want to see more of the plans for economic strategy, recovery of the economy and the new regulatory framework," says Angela Knight, chief executive of the British Bankers' Association. "We are realistic that only so much can be said before an election, but we would like to have more understanding of what is being proposed."
So far, Osborne's suggestions to reform the City itself have had mixed reactions. Some have applauded his plans to strengthen the Bank of England by enhancing its powers of regulation and abolishing the Financial Services Authority. But senior figures at the Bank have been less enthusiastic. Plainly, there was a political calculation in the Tory proposals, published in July, as the second paragraph cited the failure of the tripartite system of regulation created by Gordon Brown. But critics say Osborne has not addressed key questions, such as the future role of the Monetary Policy Committee.
More controversial is Osborne's proposal to cap cash bonuses at the bailed-out banks - £2,000 has been mooted. The idea is that bankers should be paid in shares, so that the banks can concentrate on injecting cash into the economy. On the trading floor, many City people were furious. Even in the boardroom, bosses dismissed the plan as naive: issuing more shares could dilute the taxpayers' own stake and foreign banks operating in the UK would not be affected. Meanwhile, private equity has been unhappy about his plan to end tax relief for interest on the industry's debt repayments. But Osborne seems to have calculated that this was a vested interest he could afford to upset, as with his campaign against wealthy, non-domiciled foreigners.
In this context, it looks significant that the Icap boss, Spencer, has been sending out a message in recent days that he hopes to see the Tories cut corporation tax to below 25 per cent and reverse the 50 per cent income-tax rate. The City needs reassurance.
Osborne has good reason to focus on short-term political goals, because he is also the Conservatives' general election chief strategist. But his reported admission that he spends only 40 per cent of his time on economics (a claim his aides now dismiss) has alarmed senior business people. Some lobbyists complained to me that, where once it was easy to get an audience with Osborne, they are now told to see Clarke instead. The City may rate Clarke, and indeed Philip Hammond, the shadow chief secretary to the Treasury, but now more than ever it wants a shadow chancellor who is focused exclusively on Treasury matters, not the machinations of politics. Osborne's aides say that this distinction is misleading. "Getting the politics right is necessary to get the economics right," I was told.
Before the recession, Osborne and Cameron used to talk about "sharing the proceeds of growth". Now the shadow chancellor says only the Tories are able to carry out the dramatic reform of the public sector that would ensure the front-line NHS and schools budgets are not slashed. Leaving aside the validity of his case, the danger is that Osborne sounds too clever by half in arguing that, because his cuts will go deeper, they will ultimately be less painful. But then, Vince Cable recounts an intriguing tale in his new book. He claims that he heard, second-hand, that: "Osborne was relaxed about being a poor shadow chancellor if he was going to become the real one on the back of the government's unpopularity."
The City expects better than that.
Gideon Spanier is business and media correspondent of the London Evening Standard