Autumn Statement 2014: Osborne's deficit cut plans fall flat

It was all meant to be very different from this.

When George Osborne set out his plans in his first Budget as Chancellor in 2010, he said they would put Britain "on track" to eliminate the deficit - the amount by which Government spending outstrips revenues - and have state debt on a downward trajectory by 2014/15.

Under that scenario, today's Autumn Statement and the crucial pre-election Budget next March would be the time to reap the rewards for fiscal discipline, with sweeteners in the form of tax cuts and spending increases to woo voters before the country goes to the polls in May.

Instead, Mr Osborne has his hands tightly tied by economic figures which are likely to show that the job of deficit reduction is barely half-done, and may not even be completed by the end of the next Parliament in 2020, after five more years of austerity.

Borrowing unchanged

Expectations are that the Office for Budget Responsibility will indicate that, far from falling £11 billion as planned, the amount the Government borrows this financial year is likely to be virtually unchanged at almost £100 billion.

With total debt still rising to the vicinity of £1.4 trillion, Mr Osborne is set to have borrowed more in five years at the Treasury than Labour chancellors did in 13.

The grim figures at a time of buoyant GDP growth are believed to result from lower-than-expected revenues - attributed variously to falling oil prices, sluggish income tax receipts and a fall-off in stamp duty on property purchases as the housing market slows.

Labour blames a "low pay recovery", in which a large proportion of the growth in employment has been accounted for by part-time or minimum wage workers paying little or no income tax to the Treasury. Tories insist that unpredictable external events - principally the long-running crisis in the eurozone - are to blame for blowing Mr Osborne's plans off course.

Can he meet revised targets?

Whatever the precise reason, the Chancellor goes into the Autumn Statement with a big question mark over whether he will be able to meet even his revised target of eliminating the deficit in 2017/18.

That, in turn raises doubts over the economic credibility of any giveaways, such as the £7 billion worth of tax cuts promised by David Cameron if Tories win next year's election.

The run-up to the Autumn Statement has featured a series of "good news" announcements of extra money for the NHS, spending on roads, homes and flood defences and support for mental health.

But critics say that the plans involve little new money, with much of the £2 billion for the NHS recycled from elsewhere in the health budget and infrastructure announcements detailing the allocation of previously-committed funds rather than an injection of new cash.

With Mr Osborne insisting that he can achieve his deficit reduction target without tax rises, the Institute for Fiscal Studies is predicting deep spending cuts in non-protected budgets - such as police, local government and environment - over the coming years.

Deep cuts could still be needed

Contrary to Treasury Chief Secretary Danny Alexander's claim that only "smallish" cuts remain to be made after the election, the economic thinktank expects spending to fall by about £28 billion over the next parliament, compared with about £23 billion during the five years of coalition.

All of this means that, rather than being able to promise voters good times ahead as he had hoped, Mr Osborne is in the decidedly unattractive position of going into the election amid predictions of more pain to come.

However, ministers can take heart from opinion polls suggesting that voters continue to trust Mr Cameron and Mr Osborne more with the economy than Labour's team of Ed Miliband and Ed Balls.

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