This morning's papers make grim reading for George Osborne. Unemployment is at a 17-year high and is likely to rise further. Growth is now expected to be just 1 per cent this year and next. Worst of all for the Chancellor, a deficit hawk, the government will be forced to borrow around £109bn more than forecast at the time of Spending Review and billions more than Alistair Darling would have. In addition, it is thought that Osborne will miss his target to eliminate the structural deficit by 2014-15 - the part of the deficit that remains even after growth has returned to normal - owing to the fact that the output gap - the difference between potential GDP and actual GDP - was smaller than thought. For the Tories, whose political fortunes are intertwined with those of economy, these are troubling times.
Osborne's pledge to eliminate the structural deficit in one parliament was based on a political timetable, not an economic one. By 2015, Osborne envisaged that the Tories would be able to boast that they had claned up "the mess" left by Labour - a powerful political narrative - and offer cuts in personal taxation. But anaemic growth, higher unemployment and, consequently, higher borrowing mean that this is an increasingly distant dream. Osborne's ultimate goal - a Tory majority - is slipping out of reach. As Peter Oborne writes in his Telegraph column this morning:
If the Chancellor gets it right, David Cameron's Conservative Party will probably command a majority after the next general election. If Osborne gets it wrong, his friend Cameron will go down in history as an Old Etonian version of Gordon Brown: a one-term prime minister who never won a general election ... Eighteen months after David Cameron entered Downing Street, it can be stated with stone cold certainty that George Osborne's economic strategy is not working.
Despite Labour's consistent lead in the opinion polls, there is a default assumption in Westminster that the next election is likely to result in a Tory majority. But several factors mean that this is no longer the case. The Tories continue to struggle in the north, where Labour leads by 28 points, and in Scotland, where Labour leads by 16 points. Ukip's recent surge in support - the party is on 6 per cent in the latest YouGov poll - is also troubling Tory strategists. Nigel Farage's party cost the Tories up to 21 seats at the last election (there were 21 constituencies in which the Ukip vote exceeded the Labour majority) and could cost them even more next time round. Finally, as Andrew Cooper, Cameron's pollster, knows all too well, the Tories remain the most toxic party. While 70 per cent of the electorate say they would be prepared to vote for Labour, just 58 per cent say they would consider voting Conservative. As ConservativeHome's Tim Montgomerie noted recently, "In order to win an election we need to convert a good three quarters of our potential voters while Labour only needs to capture a much smaller proportion."
The hope among the Tories was that the success of Osborne's economic plan would override all of this. A grateful electorate would rush to thank the Iron Chancellor for balancing the books. But the near-collapse of growth means that there is no chance of Osborne wiping the slate clean. The question the electorate, facing the biggest squeeze on living standards since the 1920s, will ask is "what was all the pain for?" The Tories had better have a very good answer.