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Thatcher II? Britain poised to slash budgets, government's role.

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Whether Osborne's team succeeds in a sales job for an austerity budget during a deep recession will be an indication of how much public support Cameron will be able to muster for his campaign to transform Britain, much as former Tory Prime Minister Margaret Thatcher did in the 1980s, when she sold off state-owned industries and slashed welfare spending.

His approach borrows heavily from Canada, which slashed its national debt from almost 70 percent of GDP to below 30 percent in a three-year period in the 1990s with a package of spending cuts and tax increases. The Conservative-dominated coalition is eager to emulate both the style, and success of Canada's approach.

Spending star chamber

"They brought together the best people from inside and outside government to carry out a fundamental reassessment of the role of the state,” said Osborne, who also laid out plans to set up a so-called "star-chamber" of senior ministers and civil servants to whom ministers will have to justify their spending. “They [Canada] asked probing questions about every part of government spending. They engaged the public in the choices that had to be made and they took the whole country with them."

Will the Canadian model work?

Worried onlookers point out that Canada in the 1990s had much healthier economic partners, while today much of the world is grappling with recession, too.

“One worry would be that Canada in the 1990s – while it was cutting public spending very aggressively – was able to benefit from extremely strong growth in its main export market, the US," says Tony Dolphin, Chief Economist at the Institute of Public Policy Research, a left-leaning think tank. “Obviously, we have got our main export market in the doldrums at the moment and interest rates are already at half a percent. So we may not have the sort of monetary and external stimulus needed to offset the fiscal tightening.”

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