After a year of painful austerity, we’re worse off than ever.

As the chancellor’s Autumn Statement made clear yesterday, the government’s plans to cut us back to growth have gone way off track. Last year’s tenuous recovery has been utterly squashed by inflation, global uncertainty and public sector job losses. After a year of painful cuts, the prospect of eliminating the structural budget deficit has receded still further into the distance – and that’s assuming we swallow another agonising dose of chancellor George’s dubious medicine.

This newspaper likes to sound supportive of the work being undertaken by civil servants, but can find little to offer confidence within the ‘growth plan’. Admittedly, the boost for the regional growth fund is sensible (albeit completely contrary to Tory views on ‘picking winners’), and the £5bn of public cash for infrastructure schemes will lay the foundations for further growth. But alongside these ideas there are worrying signs that events since 2007 have taught the government nothing about honesty on borrowing or property markets.

Outline plans to tempt the pension funds into paying for infrastructure look rather like a new version of PFI, under which we pay more for projects in order to keep them off the balance sheet. Guarantees for mortgages make explicit the government’s commitment to underwrite bank lending; one can imagine the air in the Bank of England turning blue with curses against ‘moral hazard’. Selling off social homes at half-price represents a vast public cash giveaway to a tiny minority, while cutting the number of affordable properties.

Meanwhile, with the extension of pay caps and the prediction that 710,000 public jobs will go by 2017, the outlook for public sector workers grows darker still. Inflation is running at more than five per cent, yet most will be caught between pay rises of two per cent over four years and a pension contribution increase of three per cent; by 2015, many are likely to see their take-home pay fall by a fifth. Add to this the squeeze on tax credits and the predicted rise in unemployment, and the shops look set for a dismal Christmas – leading to yet more worries about the economy and further increasing consumers’ reluctance to spend.

For those who survive all that, the government is planning yet more austerity. While real terms spending cuts will average 0.2 per cent between 2011 and 2015, immediately after the next election Osborne has planned in annual cuts of 0.9 per cent for 2015-17. Under the current plans our objectives have grown still harder to realise, so the chancellor thinks we must go further and faster. Either these new cuts are more radical than anything to date, or they represent a convenient fiction designed to let George Osborne pretend we can still balance the budget by 2017.

After the emergency Budget more than a year ago, this column argued that “taking this much money out of the economy, this quickly, risks pushing us straight back into recession as public jobs and procurement nose-dive… If this shock therapy drops us back into recession, we could find that we have both massive public debts and economic decline” (1 July 2010). Those fears have come to pass. When the facts change, Mr Osborne, do you change your mind?

The government, of course, argues that we must appease the bond markets. But what if their prescription is only making things worse? If the cuts applauded by these markets strangle the economy, the traders will be the first to abandon ship – and the evidence of the credit crunch is that bond markets can be just as mistaken as governments. As the July 2010 Editorial said: “Obviously, the government’s plans do need to be ambitious enough to reassure the bond markets – but a return to recession is more likely to spook those markets than a slightly slower move into budget surplus.”

This newspaper is not recommending a government retreat on the pension cuts. With workers suffering in both sectors, private staff can’t be expected to fund big subsidies for public pensions – and pension liabilities can’t produce the boost that the economy needs. But the Autumn Statement offers us few prospects for growth, and no vision for a revived economy.

We live in only-too-interesting times – times in which a deepening Euro crisis could sweep away in an instant any good that a more positive growth package could produce. Yet there is plenty that the coalition could do to get things moving: support green businesses rather than help smelters avoid carbon taxes; lend money to consumers and investors rather than to the banks; hand taxpayers a pre-Christmas gift of £50 to offer high streets a glimpse of hope.

Ultimately, only a fair economic wind will bear the UK back into budgetary surplus – and given the headwinds currently blowing out of Europe and the Middle East, Osborne’s strategy of lowering the sails is a recipe for stagnation. So we need another approach. It would take longer, and it would be less direct, but the chancellor may have to get us to warmer waters by changing tack.

Written by Matt Ross, CSW