Leader: This is no time to be complacent, Mr Osborne

The coalition's plans make a stagnant recovery unavoidable.

''The plan is working," George Osborne declared triumphantly as he delivered his economic update to the House of Commons. The Chancellor hailed the latest forecast from the Office for Budget Responsibility, which predicts growth of 1.8 per cent this year, higher than the 1.2 per cent previously expected. But his boastful rhetoric masked several inconvenient truths. For a start, due to the time lag in fiscal policy, Mr Osborne can take little credit for growth this year, much of which is due to Alistair Darling's stimulus package.

Meanwhile, the Chancellor's reckless and premature spending cuts have led the OBR to downgrade its growth forecasts for the years ahead. The watchdog now expects growth of 2.1 per cent in 2011, down from an earlier prediction of 2.3 per cent, and growth of 2.6 per cent in 2012, down from 2.8 per cent. As the OBR itself pointed out, this means that growth will be "at a slower pace than in the recoveries of the 1970s, the 1980s and 1990s". Mr Osborne's cuts may not trigger a double-dip recession, but they will guarantee an anaemic recovery.

On employment, the Chancellor offered a similarly distorted picture. He trumpeted the forecast that, by 2015, public-sector employment will fall by 330,000 - 160,000 lower than first thought. But he neglected to mention that 130,000 of this reduction is due to the coalition's decision to cut more from welfare spending and less from departmental budgets. In other words, Mr Osborne has merely substituted one form of economic pain for another. By 2015, unemployment, at just under two million, will still be above the pre-recession level and the claimant count will be more than one million. Moreover, these figures are premised on a near-mythical faith in the ability of the private sector to generate new jobs. As the shadow work and pensions secretary, Douglas Alexander, points out, the sector that created a mere 300,000 jobs between 1993 and 1999 is now expected to create more than two million between now and 2015.

But perhaps the most eye-catching figure in the OBR document was the estimated £6bn Budget surplus that the government will enjoy by 2015. This apparent piece of favourable news was left unmentioned by Mr Osborne. And with good reason. The projected Budget surplus gives the lie to his claim that the "cupboard is bare". Nowhere is this truer than in the area of higher education.

In an article for the London Evening Standard on 30 November, David Cameron echoed his Chancellor and claimed that the coalition's decision to increase university tuition fees was "unavoidable". But as the sixth-largest economy in the world, Britain can easily afford to fund free higher education through general taxation. The UK spends just 0.7 per cent of its GDP on higher education. Compare this to France (1.2 per cent), Germany (0.9 per cent), Canada (1.5 per cent), Poland (0.9 per cent) and Sweden (1.4 per cent). Even the US, where students make a considerable private contribution, spends 1 per cent of its GDP on higher education.

The decision to triple tuition fees is, therefore, a political choice, not an economic necessity. Little wonder that the governor of the Bank of England, Mervyn King, lamented that Mr Cameron and Mr Osborne "had a tendency to think about issues only in terms of politics, and how they might affect Tory electorability".

Mr Osborne's increasingly complacent air is ill-befitting of a man who plans to raise VAT by 2.5 per cent in the new year and to slash £81bn from public expenditure. The coalition's plans make a stagnant recovery unavoidable.

This article first appeared in the 06 December 2010 issue of the New Statesman, Vietnam: the last battle