The Budget is traditionally thought of as an exercise in showing how the nation's books can be balanced. In this case, it is more a case of demonstrating to the world how difficult, if not impossible, it will prove to pull public finances back into any sort of balance.
The numbers are galling. As recently as the pre-Budget report in November – half way through the tax year – Mr Darling told the nation that borrowing in this fiscal year would be £78bn.
It has turned out to be some £90bn. Next year it will soar to £175bn, about 12 per cent of GDP, one of the highest in the western world, and four times higher than Mr Darling thought it would be this time last year. Nor will it decline very rapidly. It will still be £173bn in 2010-11, and as high as £97bn in 2013-14.
It is instructive to see things through the prism of old fiscal rules the government had to abandon last year. The "golden rule" stated that the public sector should only borrow to invest over the cycle. In other words, the current balance of public spending – excluding infrastructure items – ought to be in balance over relatively short time. According to Mr Darling's latest calculations the Government's usual five year fiscal horizon has to be put back to 2018 before the current balance swings back into balance, and some economists doubt even that.
In terms of the ratio of national debt to national income, the original "sustainable investment rule" framed by Mr Brown a decade ago stipulated that the stock of national debt should be kept to below 40 per cent of GDP. The Maastricht Treaty, to which the UK is a signatory – notwithstanding its single currency opt out – puts the obligation at 60 per cent. On these measures, the UK will not be within sight of fiscal probity for decades.
On Mr Darling's own numbers, the ratios will peak at something like 80 per cent of GDP in 2015-16. Many observers, such as the Institute for Fiscal Studies, put the stock of debt stubbornly high for even longer, suggesting it might stabilise at closer to 90 per cent by the early 2050s.
Most economists remain sceptical that the British economy will be able to grow rapidly enough for any government to be able to make a determined assault on the stock of debt without swingeing rises in taxation or cuts in public spending – measures even more stringent than those Mr Darling announced yesterday.
Mr Darlings optimistic forecast for growth flatters his borrowing figures, inflating GDP and making debt look smaller. Instead, some believe national debt could reach 100 per cent of GDP soon, and that borrowing next year will approach £200bn, against the £175bn planned.
Ben Read, managing economist at analysts CEBR, commented: "We all knew that the Chancellor's hands were tied before he stood up today, but the least we should have got was a semblance of a plan to sort out the public finances in the medium term. Instead we got a work of fiction.
"The Chancellor's growth forecasts are wildly optimistic, and the public finances will be even worse than the horrendous predictions in today's budget.
"As a result, the borrowing forecasts look completely shot. The government said public sector borrowing this year would be £175bn. We think it will be around £190bn, and whilst the government thinks borrowing will fall next year, we think it will actually rise to about £200bn. Under current plans, we think there's no chance that borrowing will halve in five years, and will remain well above £100bn until 2013.
"The next Chancellor will have a fine mess to sort out."
The growth in public spending will be constrained further, from a real terms annual rise of 1.1 per cent specified in the pre-Budget report, to a tiny 0.7 per cent real terms increase in yesterday's Budget for the five years after 2010 (and after the election).
Given the inevitable rise in the bill for unemployment benefits, plus an additional £2bn for training put forward by Mr Darling yesterday, and given the equally unstoppable rise in the cost of servicing a national debt set to double soon, such a measly rise can only mean real, deep cuts to "front line services".
Already the budgets for defence, the universities and culture, media and sport looked squeezed. There may be worse to come. That means more pay disputes and strikes in the public sector, and reforms to public sector pensions.
Finally there is the spectre, raised by the IMF yesterday, of the Treasury having to find a further £85bn to recapitalise the banks.
Such sums are bearable, but only in the sense that the cost of fighting Hitler's war was bearable. Bearable – but extremely uncomfortable.Reuse content