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Forget about prescriptions. Osborne's cure is killing us

DID someone forget to tell the International Monetary Fund about prescription charges?

Did no-one explain that allowing poor folk to breed freely is the sole obstacle to Britain's economic recovery? Without that essential information, the IMF was bound to get its figures wrong.

All governments try to change the story when things go awry. The Tories, with plenty of experience to call on, are past masters in the art of the grand distraction and the tainted narrative. This time around – and you have to hand it to them – they have enjoyed notable success in shifting the conversation.

Forget a profound and absolute failure of Coalition economic policy. How many welfare recipients can be victimised? Forget the post-election promise that Britain would be returned to growth – 2.8%, said George Osborne in 2010 – long before now. Let's play beggar thy neighbour instead. Let's talk about the things Tories would always rather talk about.

Until yesterday, it was all going so well. Then the IMF spoiled the Conservative conference somewhat by pointing out that the Chancellor's running repairs have stalled the economic engine. He may even have caused a gasket to blow. After two and a half years of his crisis management, the crisis is, by any measure, worse than before.

The IMF doesn't use that kind of language, of course. In fact, its collective right-wing heart is with George, even as its head does the sums. In its familiar orthodoxy it wants to believe that the Coalition has Britain on the right track. But its figures say that, whatever the track, we are moving backwards.

Britain's performance has been "revised downwards", and with a vengeance. All the talk about prescription charges "practically" killing cancer patients, about workers surrendering still more rights, about the feckless poor and their children, is beside the point. It is entirely irrelevant. The failure to achieve economic growth is real and absolute.

In July, the IMF thought that Britain might manage a mighty 0.2% growth this year. Now it expects the economy to have contracted by 0.4% by the year's end. No other major economy has been marked down to such an extent. It must be all those shiftless pensioners, taking more than they contribute.

Britain's manufacturing output dropped by 1.1% in August. That will be the direct result, no doubt, of unemployed young people claiming housing benefit. The trade deficit widened again, to £4.7 billion, the second highest on record. Presumably that's what happens when you fail to deal promptly with the disability living allowance.

At this point, someone hostile to the Coalition would throw in a few Scandinavian comparisons to show Mr Osborne in a poor light. That would be unfair, of course. Norway might be expecting growth of 3.7% this year. It might spend handsomely on social justice. But Norway is blessed with oil wealth and there is not another country in Europe – I think I've got this right – that is so fortunate.

Let's take the case of France instead. The French are not doing so well. Their budget deficit is worrying. Their unemployment rate, two points higher than ours, just won't budge. They have one of those bloated public sectors – 56.3% of GDP; only the Danes are more profligate – that so appals Mr Osborne and Ruth Davidson of the Scottish Tories. The IMF's figures for France have also been revised.

The figure for 2012, disputed by the government of Francois Hollande, is nothing whatever to boast about: 0.1%. It is still fully half of a percentage point better than Britain can hope for. It is also the outcome predicted for a country, "lavish" public services and all, that has managed to escape recession through all of this long, grisly year.

What does this tell us? Mr Hollande, if you believe him, is keen on reform. The IMF is sceptical about his deficit reduction target – to 3% of GDP by next year – but accepts that budget cuts are in train. The French will no doubt be outraged by those, when they happen. The fact remains that their country is free from recession and likely – if this any comfort – to outperform Britain. Contrast, as they say, and compare.

France is not prospering; quite the opposite. With an economy roughly comparable to that of the UK, it is picked out by the IMF, in fact, as one of the least-impressive of the developed nations. Yet it stands as proof that Mr Osborne's fixation with punitive austerity is not just a failure, not just a familiar ideological spasm, but a counter-productive failure. Worse than the French: it's quite an epitaph for a Tory.

The clever folk in Washington who reach conclusions on behalf of the IMF half-recognise the nature of Britain's plight. Reflexively, they praise the Coalition's efforts to balance income and expenditure. Then they notice that deficit reduction grows ever harder as tax receipts fall in a shrinking economy. They only omit to ask whether Osborne, sound chap, might not be exacerbating the problem by causing the economy to contract.

What other explanations are available, just at the moment? The Chancellor, with his "80-20 rule of thumb" – 80 being spending cuts, 20 any tax increases – refuses to alter course; the economy refuses to respond. The upshot is that austerity will continue, so Mr Osborne assures us, at least until 2018. He means to fly in the face of reality until reality becomes obedient.

If not, he'll blame the eurozone, as though France, still growing, has nothing to do with that mess. If not, he'll blame a global problem, or a local welfare bill, or Labour's "overspending" (because he would never have handed a trillion to banking). Britain's economy will be precisely as dire this year, says the IMF, as the entire euro area, Germany to Greece, Holland to Spain. At which point, and in what manner, is Mr Osborne's panacea working?

The great distraction of welfare and universal benefits will do for now. It appeals to the prejudices the Tories understand to so well. But the gaudy illusion is fraying at the seams and the edges. Soon enough, voters will see right through it.

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