A bleak message: pain now, pain later The British economy, George Osborne announced yesterday, is "healing." Unfortunately, he added, the wound was far more grievous than previously thought. The financial crisis inflicted the greatest shock since the Second World War, slashing 6.3 per cent from GDP - and Gordon Brown's reckless fiscal mismanagement left us in no position to cope. With the recovery beset by unexpected external shocks, not least the crisis in the eurozone, Mr Osborne was forced to admit that the road back to prosperity will be longer - and steeper - than was foreseen. The Chancellor's tone throughout his Autumn Statement was commendably grim: he did not sugar-coat the scale of the country's problems, and was able to invoke the authority of the independent Office for Budget Responsibility to justify his downbeat tone. Instead of the tricksiness of the Budget, there was a wealth of detail, with Mr Osborne eager to avoid accusations of Brown-style figure-fiddling. Yet whichever chart you studied, the message was stark. The Chancellor was able to dodge one bullet, by insisting that the deficit will come down this year (wrong-footing Labour's Ed Balls, who had one of his worst days at the Dispatch Box). But at roughly 7 per cent of GDP, borrowing is still perilously high - and the day when we will start to pay our debts down, rather than building them up, is receding ever further into the distance. Which raises the essential question: if the situation is so terrible, why is the Government not responding more urgently? Instead of bringing in further spending cuts to keep deficit reduction on track, or pulling some other rabbit from his hat, the Chancellor gave the impression - with some justification - that the fate of the economy is largely out of his control. So he will keep to the same course: trimming a billion here, spending a billion there, but leaving the broad contours of the fiscal settlement as they were. As a result, many of the key announcements echoed previous statements. There was a cancellation of the planned fuel duty rise - welcome news, especially in the countryside. There was another cut in corporation tax; more belt-tightening for those on benefits; and further restrictions on pension allowances for high earners. The Chancellor saw off one of the Liberal Democrats" worst ideas, the mansion tax, and embraced their best, taking more people out of the tax system. Sadly, this was matched by the familiar use of fiscal drag to entangle 400,000 more workers in the net of the 40p higher rate. Some of Mr Osborne's ideas were more novel. Alongside the cut in corporation tax, his increases in capital allowances for businesses and his confirmation of new funding for schools, roads, rail, broadband networks and science spoke of a determination to make Britain more competitive, and to persuade firms to stimulate the economy by opening their wallets. The embrace of shale gas is long overdue, and the introduction of a welfare Bill that will put Labour on the spot is a clever piece of politics that - like much of yesterday's parliamentary debate - highlighted the Opposition's lack of anything remotely resembling an alternative. Freeing schools to set teachers" pay sets a precedent that should be followed across the public sector. As for the resurrection of the Private Finance Initiative, we await the detail - not least whether such borrowing will be on the balance sheet. In short, within the parameters that the Chancellor had set himself, this was as solid a package as he could deliver. It may gall his party's natural supporters to hear about further savings being achieved "from bureaucracy, from benefit bills and the better off" - as though those who work hard to succeed are a drain on the nation - but everyone was promised their share of the suffering, now and for years to come. Which leads us back to that essential question: ignoring the precise details, is Mr Osborne's basic course correct? His hopes for the future rest on the forecasts of the Office for Budget Responsibility, which still predicts a return to growth as the years go by. Given the volatility of the world economy, and the woeful inaccuracy of the OBR's previous predictions, that is a heady hope indeed. At the limits of the crystal ball's gaze, in 2017/18, public spending will be down from 48 per cent of national income (in 2010) to a still-high 39.5 per cent; the structural deficit will be under control; debt will have topped out at roughly 80 per cent of GDP; and the sunlit uplands will at last be in view. But all that depends on growth by then of almost 3 per cent. Would anyone bet their life on that prospect? In the face of such uncertainty, the explanation for the Chancellor's seeming sang-froid is simple: he has to operate within the limits of the politically and economically possible. He knew that the Liberal Democrats would bitterly oppose an extra £17 billion of cuts to meet his fiscal targets - and that such a move could suck demand out of a perilously weak economy. That decision could cost Britain its AAA credit rating, but it is not hard to see why it was made. While Mr Osborne's diet of prolonged austerity may not be to everyone's taste, it does strike the difficult balance between what needs to be done and what the public will accept. Still, given the basic and cavernous gap between what the state is receiving in tax and what it is spending, it is hard to avoid the feeling that a reckoning has been delayed, rather than averted.