A LITTLE bird, who is close to these matters, told me recently that Chancellor Osborne has a bad temper. He’s been known to bawl-out advisers and civil servants in public, just a little too often. Behind the Chancellor’s supercilious smile and know-it-all smirk lurks a personality that gets a trifle heated when events don’t go the way he wants. Which makes me think there will be a lot of angry noise emanating from the Chancellor’s office in the Treasury this year, as the economy runs into further trouble.

As if on cue, last week George Osborne dropped two economic bombshells. First, he went out of his way to warn that the UK economy faces a “cocktail of threats” from events taking place in the global economy. He mentioned the stock market turmoil in China and the collapse in global commodity prices. We are meant to believe that if anything goes pear-shaped in the UK economy in 2016 it is not George’s fault. That sounds very much like Gideon Oliver Osborne – he added the George himself, aged 13 – is making his excuses early.

Second, seemingly as a throw-away line in a radio interview, the Chancellor casually announced that Tracey McDermott, the acting head of the Financial Conduct Authority (FCA) had withdrawn her application to become the agency’s permanent boss. Thereby hangs a tale. McDermott’s fate is bound up with the Chancellor’s plot to return to “light touch” regulation of the big banks and financial institutions. And we all know that happened when a certain Gordon Brown let the bankers off their regulatory hook – a financial melt-down.

So what really gives in the UK economy? Back in 2010, and fresh into Number 11, Chancellor Osborne promised two things: to rebalance the economy away from banking towards manufacturing exports, and to reduce borrowing to zero by 2015. He’s done neither.

Far from rebalancing the economy, Osborne has presided over Britain yet more dependent on services. Gross Value Added in UK manufacturing – which nets out stuff companies buy-in as materials, often imported – has flat-lined since 2008. Even if you look simply at total production data (ignoring imported sub components), UK manufacturing output is less than in 2000. Yet in Germany between 2000 and 2013, manufacturing output rose from $545bn to $663bn, or 22 per cent. UK manufacturing output is barely ahead of where it was in 1990 – a full generation of stagnation.

On the trade front, things are worse. The latest statistics reveal that a total of 310,800 firms in the non-financial sector in Great Britain were engaged in international trade during 2014. This is actually a decrease of 4,300 businesses compared with the number of businesses that traded internationally in 2013 (315,100).

I hear a voice shouting from the Chancellor’s office: “Service jobs are just as important as manufacturing jobs, and we’ve grown lots of them!” OK, I agree that service jobs are important. But here’s the problem: our service-led economy is based precariously on consumer debt, not on innovation and investment in manufacturing. Which might explain why George Osborne is worried.

Economic growth arises when people buy more. This extra spending comes from only three sources: consumers, industrial investment or exporting. Under George Osborne (and Gordon Brown before him), industrial investment has been poor. Export performance has been equally unexciting, by global standards. Result: UK growth comes overwhelmingly from British consumers buying more in the shops, not from firms investing in plant and machinery, or foreigners buying our stuff.

Question: where do British consumers get the extra cash to buy more in the shops, thus creating the economic growth for which George Osborne claims credit? They might get it from rising incomes, but wages and salaries are not actually going up very fast. In fact the latest data shows that pay growth has slumped to its lowest rate in over two years (an index of how weak the trade unions are). Which means that UK growth is really depends on consumers borrowing more.

Consumer borrowing on credit cards, loans and overdrafts is now expanding at its fastest rate since before the financial crisis, according to the Bank of England. Unsecured consumer credit was up 8.3 per cent in the year to November, with consumers borrowing an extra £1.5bn in November alone. Consumer debt can’t go on rising indefinitely, especially if interest rates rise. Now you know why George Osborne is looking for scapegoats.

Why hasn’t the Chancellor been able to rebalance the economy towards manufacturing? The truth is that Britain has a taxation system that favours investment in property rather than long-term investment in manufacturing. And it has a banking and financial system that prioritises gambling on the money and foreign exchange markets rather than supporting manufacturing innovation and technology. George Osborne talks the talk but he does not deliver when it comes to supporting the real economy. Quite the reverse: he has now begun to backtrack on the tough banking regulation brought in after the 2007-08 Credit Crunch. Why? Because the City of London dominates the block of interest groups that make up the British establishment. Manufacturing, which makes up barely 10 per cent of UK output, has long been relegates to the third division in political influence.

Osborne wants a return to a more light-touch regulation of the banks, particularly so he can attract Chinese financial institutions to London. Proof: in July, Osborne fired Martin Wheatley, head of the main City watchdog, the Financial Conduct Authority (FCA). Wheatley famously quipped that he would “shoot first and ask questions later” when dealing with financial misconduct. His tough stance led to calls for his removal. Osborne duly obliged as well as cutting the tax levy on the big banks, after HSBC threatened to move its head office from the UK to Asia.

Wheatley’s acting replacement was Tracey McDermott. Under her direction, the FCA has drawn its claws. Just before Christmas, it cancelled a long-scheduled public inquiry into bank culture. The public outcry resulting from this craven move led the powerful Commons Treasury Select Committee to demand McDermott appear before it for questioning. At which point, George Osborne suddenly took to the airwaves to reveal that Ms McDermott had decided to withdraw from the contest to become permanent boss of the FAC. That leaves the watchdog effectively rudderless. I can hear wailing and gnashing of teeth in the City – not!

My best guess is the real economic manure won’t hit the fan till 2017. But storm clouds are gathering with China devaluing, the Saudi-Iran conflict boiling over, Europe mired in deflation, and rising interest rates in the US accelerating a global flight of capital to safe havens. Sadly, devolved Scotland lacks many of the economic levers it needs to rebuild its manufacturing base and escape the casino capitalism of the City of London. But that should not stop us trying with the tools to hand.

After May, a re-elected Scottish Government needs to call in industry and the STUC and map out a long-term plan to raise domestic investment and boost exports. Scotland needs to pioneer a shift from consumption to savings and capital investment. We don’t have long before George Osborne’s financial house of cards comes down about our ears.