On the deficit, George Osborne's rhetoric is a million miles away from the reality Nor has the Chancellor yet made serious inroads into the budget deficit, which has remained firmly stuck at around £120bn for three years now. Cumulative borrowing has soared correspondingly. It was meant to peak at 70.3pc of GDP this year; the latest forecasts place the peak at 85.6pc of GDP three years hence, or more than 100pc using the IMF's more demanding measure. To his intense embarrassment, the Chancellor will be borrowing £70bn more next year than he had originally hoped. Mr Osborne's debt target has gone up in smoke, rendering his overall "fiscal mandate" pretty much meaningless. Now he promises yet another fiscal framework, one that will ensure a budget surplus is run at all times when the economy is growing. In this way a war chest can be built up "as insurance against more difficult times ahead." This is a fine idea in principle, yet at the present rate of progress you have to wonder whether a surplus will ever be achieved in the first place. Certainly, it seems more than likely that the next downturn will be upon us by the time one is. In the meantime, the Government keeps on committing itself to fresh giveaways, despite Mr Osborne's insistence in Monday's speech that tax cuts must be paid for, not funded with borrowed money. Almost in the next sentence he announced a new freeze on fuel duty, "provided we can find the savings to pay for it." Where's the funding for that one going to come from - the tooth fairy? None of this is to argue that the Government has got its economic policy wrong, only that it could have been done better and can still be greatly improved upon. OK, so Mr Osborne can reasonably claim that the delay in closing the deficit is not entirely his fault. Deficit reduction has been put on hold by lack of growth. He could not have foreseen the spike in commodity prices, or the extent of the eurozone debt crisis. It is almost completely meaningless to suggest, as some critics do, that the economy should be where it would have been had growth continued at its pre-crisis trend - or nearly 15pc bigger than it is. To think this is to descend into fantasy. After the debt-fuelled growth of the pre-crisis era, there was always bound to be some kind of an economic adjustment that would make the nation as a whole worse off. To think this adjustment entirely avoidable is away with the fairies stuff. Nonetheless, mistakes were plainly made with the original fiscal consolidation. The biggest of these was to jack up VAT. This has significantly added to the problem which is such a hot political issue today - the squeeze on living standards. Sticking to the previous Labour government's plans to slash capital spending was also ill-judged, as the Chancellor now seems to acknowledge by partially reversing the cuts. Only belatedly has Mr Osborne felt politically able to start focusing the cuts where they should be - on welfare. Unfortunately, ring-fencing of health care and pensions makes this increasingly tough work. What's more, Iain Duncan Smith's welfare reforms mean that the cost of the benefits system will rise in the short term even if in the longer term they better incentivise work. In any case, tens of billions of as yet unspecified cuts and/or tax increases will be needed after the election to close the structural deficit. And yet as polling day approaches, the Government keeps on promising more sweeties - higher personal tax allowances, free school meals for youngsters, more spending on child and social care, a married couples" allowance, subsidies for the services to buy homes, Help to Buy, and so on. In the meantime, the recovery seems to be gathering real pace. This is obviously welcome, but whether it has much to do with the Government's stated austerity agenda - the quest of paying off the nation's debt - is more than a little debatable. Time is a great healer, and it may be that renewed growth can be put down simply to a banking sector that is now substantially healed of its post- Lehman traumas. Depressed business and consumer confidence is reviving accordingly. What's more, behind the belt-tightening rhetoric, the Chancellor has in fact been engaged in a pretty significant tax-cutting programme. The higher personal allowance, abolition of the fuel duty escalator, and cuts in the rate of corporation tax - these measures alone amount to a commitment of £24bn a year by 2016-17, or nearly double the amount raised in the original VAT hike. So much for tax cuts that are earned and not borrowed. This is not to say the squeeze isn't real, yet contrary to the sophistry of opposition claims, it's actually been disproportionately focused on the better off. The top decile of income earners will be 8pc worse off as a result of post-crisis tax measures, according to Institute for Fiscal Studies modelling, whereas middle income earners are about 2pc worse off. There is no pain-free solution to the deficit, but the most effective route to the budget surplus Mr Osborne promises some time in the next parliament is growth. Let's hope the Chancellor has learnt the lesson of 2010. The temptation for incoming governments is to fill fiscal holes with tax rises, rather than spending cuts. Yet if the Chancellor is to achieve sustainable growth, he needs to find a way of putting money back in people's pockets. The true "rebalancing" challenge for the UK economy - rotation away from public spending and back to private - has yet to come.