The economic backdrop to the Budget has turned out to be even tougher than envisioned. As expected, the Office of Budget Responsibility cut its forecasts for growth sharply for 2016 and 2017.
More significantly, the OBR has given up its assumption that UK productivity growth was returning to pre-crisis levels and now thinks that the permanent damage wrought by the financial crisis has sliced 0.2% off the UK's long term growth rate. The official view is that the UK will grow by an average 2.1% a year over the next five years, just two thirds the rate seen in the ten years before the financial crisis.
A tougher global backdrop and weaker UK growth have knocked the deficit reduction programme off course. Over the next four years borrowing will be 50% higher than planned in November. Events have driven a coach and horses through two of the government's three fiscal rules, with the welfare spending cap breached and the debt to GDP ratio rising this year.
The OBR now thinks the probability of eliminating the deficit in 2019-20, and hitting the government's third and most important target, is 'only slightly above 50%'.
To get there, without squeezing the economy harder now, Mr Osborne has back-loaded the fiscal pain. The burden of spending cuts announced today falls squarely in the last year of this Parliament, with a fiscal squeeze of £8 billion in 2019-20.
Mr Osborne is clearly hoping that, in the run up to the next General Election, the UK will be better placed to cope with the squeeze needed to wipe out the deficit.
Hitting the Government's most important and most cherished fiscal target will need hard slog and luck.
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