Sorry, Rachel, but more debt is not the answer to the debt crisis

Has anyone seen George Osborne’s £3 billion? The Chancellor seems to have lost it. His government had expected to net £2.5 billion more than it spent last month, as July is normally a good month for tax receipts. Instead the figure has come in at a £600 million deficit. This is a major shock to the City, and analysts are spending today reworking their forecasts. Sure, we know the economy has flatlined. But we didn’t know that the impact on the tax haul would be so bad.

As you’d expect, Labour has gone on the attack. But the Ed Balls line (being voiced by Rachel Reeves today) sounds less convincing than ever. They say that Osborne is cutting too far, too fast, and that he should more slowly and, ergo, borrow more. But if too much debt is the problem, it far from clear that even more debt is the solution.