By committing to the largest fiscal retrenchment in living memory the coalition has gone for broke. The prime minister says it will “change our way of life”. That's the problem. Ken Clarke used to say that good economics is good politics. The government has turned this on its head. Framing the debate as a choice between the public and private sectors is certainly good politics, but it is bad economics. The Budget will force 600,000 public sector workers into unemployment. With recent surveys suggesting rapidly worsening business confidence and no evidence of an emerging hiring spree, their prospects of finding work in the private sector are bleak.
The independence of the Office of Budget Responsibility has rightly been called into question; a matter that can only be addressed by its reporting directly to parliament. But even it has joined the International Monetary Fund and private sector economists in downgrading the UK's 2011 growth forecasts, to just above 2 per cent, below the rate required to lower unemployment.
I am an economic realist. The public finances need addressing. Labour's plans would halve the budget deficit and remove the bulk of the structural deficit in four years. It is the sensible, credible middle-ground between extreme cuts and unchecked spending. But the government's proposals, designed without an escape hatch in the event of slowing growth, reflect ideology, not realism.