Outlook: Osborne running out of time to change his mind

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Nothing, it seems, willpersuade George Osborne to change his mind about Plan A for austerity. Not the shocking youth unemployment figures this week, which showed one in five 16-to-24-year-olds is without work, not further sell-offs on the stock market, and certainly not yesterday's retail sales figures, which revealed more stagnation on the high street.

Having enjoyed a resurgence, Keynes's economic views seem to have fallen from favour once again. But even if the Chancellor rejects every argument made by the great man, he might reflect on the put-down Keynes used to crush an opponent who attacked him for a change of policy. "When the facts change, I change my mind," said Keynes. "What do you do, Sir?"

This summer, the facts have changed. For most of the first half of the year, the global recovery seemed to have been secured – certainly it looked fragile, but there was sufficient growth in most of the world's major economies to be optimistic.

That optimism has now gone. The fiscal retrenchment for which the Chancellor is the great cheerleader has had an effect, for sure, but there have been other factors too: the natural disasters in Japan, for example, and the oil price shock caused by unrest in the Middle East. The eurozone debt crisis has been a further negative. And, unnerved by the onslaught of poor news, consumers in the Western world have pulled in their horns.

The response of some policymakers has been to follow Keynes's advice. We learned on Wednesday, for example, that within the Bank of England's Monetary Policy Committee, Martin Weale and Spencer Dale, who for all of the first half of 2011voted for a rise in interest rates, have changed their minds. They now prefer to keep rates on hold.

Mr Osborne, by contrast, isresolute. One can only assume that reflects the fear of political embarrassment, for his obstinacy is otherwise illogical – above all, the idea that we must stick with the proscribed level of austerity because otherwise we will miss the deficit reduction targets we have promised the markets for economic growth is now likely to fall so far behind the Treasury's projections that we are going to miss those targets anyway.

No one thinks we should not try to reduce the deficit at all. But of all the difficulties damaging the UK's prospects just now, the extent of of our fiscal retrenchment is the one factor under Mr Osborne's control.

Where to start? Well, look at the depressed levels of consumer spending and the gloom among large retailers. The case for a VAT increase back in January was understandable – since then, things have changed. The Chancellor should suspend the hike.