Weak public finances present the biggest threat to fragile economic recovery. Green shoots are starting to appear across the economy, but they have shallow roots.

Policymakers still have a lot to of work do to if those green shoots are going to turn into a rich harvest. The big question facing the economy over the coming years concerns the public finances which are in a desperate state. So will government attempt to muddle along on a wing and a prayer, hoping to contain the budget deficit as best it can and counting on a global economic recovery to get us out of trouble?

Or will it decide to be bolder and more radical than that? Will it judge that the current position is just too risky – indeed, that the UK’s public finances are now on an unsustainable path and need fixing through a period of serious fiscal restraint?

That would entail a reappraisal of every aspect of public spending, as well as an intelligent study of the way the tax system works, looking for taxes that spur efficiency rather than those that are a drag on it.

Cuts in public spending don’t have to be translated into equivalent cuts in the delivery of public services, especially if the alternative is a growing burden of taxes which bear down on the process of wealth creation. Now is the time to start thinking about spending smarter, rather than spending more.

Another dark cloud threatening the fragile economic recovery is the continued problems businesses are experiencing accessing credit, although there is early evidence that conditions might be easing. These simply highlight the funding gap created by the disappearance of foreign lenders and non-bank institutions, and the fact that UK lenders have become more cautious.

If you listen to the anecdotes that are to be heard from bruised business borrowers up and down the land, you will find that covenant renegotiations are costing many times more than a few years ago, and what look like perfectly decent business propositions are being turned down out of hand. Lending margins have quintupled. The stories go on.

The third threat to any emerging green shoots is what is happening to short term business investment and household spending. Firms are continuing to scale back their investment intentions and consumer spending will be dampened by jobs uncertainty as unemployment rises.

So although there are now indications that the economic cycle’s steep downward trend is beginning to flatten out, there is still a long way to go before a full recovery is on the cards.