Field: Deficit plans revisited

The recent Autumn Statement showed that such assurance was some way off the mark.

If there was a problem with the UK government's goal of wiping out the structural deficit in this parliament it was that it relied on some highly optimistic assumptions.

There have been three main planks to the UK government's deficit reduction plan.

First, continued low interest rates.

This has been the big success story of the past year.

Indeed the cost of servicing the UK government's borrowing has been lower than the Chancellor hoped last autumn.

The second element of the UK government deficit reduction involves its much vaunted austerity programme - reducing public expenditure from its boom-time levels with a relative squeeze in public spending not seen since the 1920s.

In view of the increasing public disquiet about perceived 'savage cuts in public spending' the government risks the worst of all worlds - receiving relentless criticism for harsh austerity measures, and at the same time failing to follow through with the political will to execute the necessary level of savings.

The facts are stark.

Over the past 12 months UK government current spending has totalled £613.5billion - the highest figure in history.

We are all now borrowing £1 in every £5 we spend collectively.

Small wonder that so much now rests on achieving the third pillar of the deficit reduction plan - growth.

Indeed £83billion of that planned deficit reduction hinges upon achieving sustained economic growth for the term of this parliament.

This was predicated in June 2010 on the basis the UK would achieve compound growth of 2.7% for each of the next five years.

In the Autumn Statement the Chancellor revised down his forecast for this year's growth to 0.9pc, from the 1.7pc predicted in March, and for next year to 0.7pc.

Growth is then expected to pick up to 2.1pc in 2013, 2.7pc in 2014, and 3pc in 2015 and 2016.

It will prove mighty difficult to sustain our 'safe haven' status if spending and the overall public debt continue rising inexorably.

Only the restoration of the UK's reputation as an outward-looking trading nation, unashamedly 'open for business' can save Plan A now.