Why George Osborne's 'Plan A' has failed - and what to do next

Does George Osborne need to adopt a Plan B? This will be the topic for a Spectator debate a week on Monday. But the argument is pretty clear to everyone with even a passing interest in the trials of George Osborne. Let’s look at the story so far.

His Plan A – accelerated fiscal consolidation – was based on two key premises:

there was no alternative to cutting the deficit much more sharply than previously planned, because otherwise the markets would panic and long-term interest rates would rise sharply. As one Treasury Minister put it:

‘Britain’s AAA credit rating was under threat…George Osborne had no choice but to come up with a comprehensive deficit reduction plan—not to merely halve the deficit over four years, but eliminate it.’

that fiscal consolidation would have only have a small impact on growth, or indeed might even be beneficial. Matthew Hancock, George Osborne’s former Chief of Staff (now a Minister at the Department for Business) discovered that ‘research into dozens of past fiscal tightenings shows that, more often than not, growth doesn’t fall but accelerates’.