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The question as the chancellor prepares his autumn statement is whether he has faced up to the country's economic reality
Whatever else George Osborne announces in his autumn statement on Tuesday, one thing is clear: plan A has been binned. The chancellor began the year claiming "there is no plan B", but that is exactly what ministers are now scrambling for as the economic outlook gets ever worse. So what voters can expect next week is a tacit admission that plan A hasn't worked, as forecast after forecast is pushed down yet again, followed by a raft of fresh proposals. The big question is whether Mr Osborne has faced up to economic reality, and whether his new measures go far enough to help stave off a second recession. The portents are gloomy.
Strip out the numbers and plan A boils down to a simple precept: the government embarks on a historic programme of public spending cuts on the premise that private spending fills the gap and powers Britain to a sustained recovery. This was not only the coalition's belief: for the past year, the independent Office for Budget Responsibility has been counting on a private investment boom, Britain exporting more than ever before and for private-sector jobs offsetting the loss of jobs in the public sector.
Put bluntly, it hasn't happened. To take one example: 111,000 jobs were shed by the public sector in the three months to June; only 41,000 were created in the private sector. The chancellor wants to blame this on the euro's crisis, but the slowdown predates that as these figures for spring indicate. What ministers have learned the hard way is what many warned long ago: that if you suck public spending out of a recession-hit economy where the state is a major driver of activity, a massive slump will result.
Which is why policy-makers have spent the past few months in a panic, fumbling around for new levers to pull. In his party conference speech, the chancellor promised something called "credit easing", to extend loans to smaller firms. This could prove important, but it all depends on the details which officials have been scrambling to sort out ever since the sudden announcement. In October, the Bank of England announced another £75bn of quantitative easing – money injected into the markets. And in the past few days all sorts of kites have been flown: underwriting of mortgages, apprenticeship schemes and the leak of a plan to bring forward spending on infrastructure, even while cutting day-to-day outgoings (a trick few government departments manage).
Many proposals carry the distinct burnt-rubber smell of the U-turn. The new quantitative easing was welcomed by the same Mr Osborne who had only two years ago described it as "the last resort of desperate governments when all other policies have failed". Credit easing marks a recognition that February's Project Merlin agreement has failed to get the banks lending enough. And yesterday's strategy to help the million young jobless looks like a cut-price version of the Future Jobs Fund introduced by Gordon Brown – and scrapped by David Cameron. The impression is of an administration that has put nearly all of its policy chips on the wrong number – and is now scattering the remainder all over the roulette wheel.
Next week the various strands will be tied up into a growth strategy. It may have a magic ingredient missing from either the growth review of last November or the growth plan from this March – but one wouldn't bet too many drachmas on that. Some measures do sound interesting, but few will be help much right now. The best, credit easing, will take a long time to introduce without the aid of Mervyn King – which doesn't look to be forthcoming. Inveigling pension funds into investing in infrastructure and pumping-up the housing market both look like lengthy processes. The chancellor will need more than this in his autumn statement. If he doesn't provide it, the only numbers to cut through on Tuesday will be the yet-lower forecasts from the OBR, outlining just what a bleak few years Britain faces.