The slog ahead has become longer. We live in a world where the mathematics of public finances dominates everything and where the scope for politicians to do anything other than press on cutting their budget deficits is just about zero.
And so it was with George Osborne yesterday. He could put a brave face on it, celebrating that the UK has such credibility that it can borrow as cheaply as Germany, maybe even more so judging by the rates yesterday. He could trot out a string of infrastructure projects designed to give a spur to growth. But the harsh reality is that the big numbers for growth and the deficit are materially worse than back in March, and that our national debt will peak at least a year later and close to £150bn higher than previously expected. All that, by the way, is on the assumption that Europe gets its act together and manages to save the euro.
Essentially we learnt two new things yesterday and had two bits of course correction in response to those. The first new bit of information was that the economy will flirt with recession through the winter. We pretty much knew that already but having the Office for Budgetary Responsibility confirm this does at least clarify things. The second new information follows on from this. Because the recovery is running a year later than expected, the correction of the budget deficit has been rolled back a year, too. The peak debt-to-GDP ratio is now expected to be nearly 80 per cent instead of a bit more than 70 per cent and the debts will barely have begun to fall by the end of this parliament. Public finances will remain under huge pressure for the rest of this decade.
In response, the Chancellor has accepted this slower-than-expected correction. You could say it is still Plan A rather than Plan B, but it is Plan A done quite a lot more slowly. Secondly, within these big numbers there has been a modest switch from current spending, that is spending on the cost of running the Government and its services, towards spending on infrastructure, the roads, the railways and so on. In the total scheme of things the switch is tiny: between £1bn and £1.5bn a year in the context of total spending of some £650bn a year. But if it pulls in more funds from the private sector and from overseas investors then it may help a bit.
It was a mark of the tight spot in which George Osborne finds himself that he should bang on about the huge boost to the country's infrastructure from his National Infrastructure Plan when all he was doing was to switch less than 0.5 per cent of public spending from one pot to another. As for the rest, the holding down of fuel prices, the further curbs on public sector pay, the additional hit to the banks and pension funds – all this may in political terms gain or lose a bit of traction but in economic and financial terms it is detail. The harsh mathematics of how much tax is coming in and how much he can safely borrow dictate everything. And do not take too much notice of changes announced in the pension age that are supposed to start in 2026 to 2028. A lot will happen between then and now.
So what will really matter? One is retaining the trust of global savers.
A point of criticism made by Ed Balls was that the Government was "offering more of the same". He is right of course. But listening to Osborne's speech and, even more so, reading the report of the OBR, you see that is all governments can do – offer more of the same. Look around Europe. There is no alternative to balancing the budget, for governments that fail to do so are punished with the full ferocity of financial markets in a funk: markets can treat errant governments even more viciously than voters. At least five governments in Europe have fallen as a result of market pressure on their national finances. The mechanisms that politicians use to establish and maintain credibility – for example Gordon Brown's "golden rule" or Osborne's OBR – are a means to an end. So far the Coalition has managed to retain trust despite Britain's weak financial position and despite the further deterioration revealed yesterday.
The other thing that will matter is luck. The Coalition has been unlucky because the start of our long trudge back to solvency has been slowed first by the headwinds of high energy and commodity prices and now by the troubles in Europe. We cannot assume our luck will turn. The situation in Europe may get very nasty indeed.
But luck does tend to even out over time and we have bought ourselves more time. We could probably slow the pace towards a balanced budget even further if that were clearly the result of things beyond our control. Let's hope we don't have to.