Despite lower growth and higher unemployment, George Osborne is still on track to eliminate the structural deficit in five years' time. Here's one reason why. The Office for Budget Responsibility now expects 710,000 public sector jobs to be lost by 2017, a dramatic increase on its previous forecast of 400,000 (see box 3.6 on p. 95 of the OBR document [2]).

The OBR notes that this is primarily because of "the additional spending cuts pencilled in for 2015-16 and 2016-17". Just a day before the strike, the government has dramatically raised the stakes in its confrontation with the public sector.

Unemployment is now expected to peak at 2.8 million (8.7 per cent) in the final quarter of 2012, before falling back to 6.2 per cent by 2016.