Green shoots of recovery? Pass the magnifying glass

George Osborne, the Chancellor, forever hoping against hope, has meanwhile said the economy is "healing". Sir John Major, a man who navigated across the occasional blasted political heath in his time, reckons that "green shoots" are again appearing, that the worst might be over. The season of faint optimism and mixed metaphors is upon us.

The non-specialist can take a couple of views of all the chatter. One is old-fashioned and simple: they would say that, wouldn't they? The actual state of the economy – now, on September 22, 2012, four long years after the bankers burst the bubble – could hardly be worse. It thus becomes rational, just about, for desperate men to bet that things can only improve. Probably.

Then there is that ancient voodoo of Westminster and the City, "talking things up". Mr King did not give his first television interview in a decade to Channel Four news this week just because he fancied a chat. Here was the economic placebo effect. If enough people can be persuaded to believe that Britain is on the mend Britain will begin, miraculously, to mend. Probably.

All three men have one thing in common: they need to believe that the Treasury is doing something right, or at least has avoided doing too many of the wrong things. In Edinburgh, where John Swinney is dealing with reality on behalf of the SNP Government, that luxury isn't available. But even the Finance Secretary has to wonder if, for a mercy, Mr Osborne and his team have ceased to do harm. His own plans depend on the answer.

So where is this healing taking place? If the latest borrowing figures are anything to go by, the patient is bleeding to death: £14.4 billion in August is a new record. Borrowing for the first five months of the year is a mere 25% above target. Any hope Mr Osborne ever had of eradicating the structural deficit by 2015 is gone. Mr King predicted as much – and all but forgave the failure – in his television interview. The Government elected to deal with debt and deficit is doing no such thing.

If he runs true to form, Mr Osborne will now commence to do several other things instead. Once again, he will squeeze the public sector and refuse to accept that this has anything to do with the absence of growth. Once again, he will demand more welfare cuts, as though the immiseration of a swathe of the population has nothing to do with the economy. Once again, he will contemplate more tax increases simply to plug his deficit. Then he will try to blame the eurozone.

Even for the Tories, this ploy is wearing thin. The collapse of the euro could – the operative word – herald a crisis for Britain. That much is true. But what is also true is that the crisis has yet to happen.

Exports bounced back strongly in July and imports fell. Oil, Mr Swinney will be interested to note, was a major contributor. Overall, the trade deficit enjoyed an impressive reduction from £4.3bn to £1.5bn. Exporters are doing their job, in other words, in selling goods and services to the United States and – imagine that – the EU. Exports to our European friends increased by almost £1bn, or 7.7%. Mr Osborne needs to find a better excuse.

The employment figures are no comfort. True, these have shown another slight fall across the UK (if not in Scotland), but the improvement has done nothing for GDP. Economists – this is not a first – are "puzzled". On paper, jobs are being created with no gain in productivity. But if too many of the posts are part-time, temporary, low wage replacements for good full-time jobs, this is hardly a mystery.

Had Mr King been right, Britain would now be enjoying growth, not recession. Had Mr Osborne been right, Britain's budget deficit would be shrinking, not growing. An implosion of the eurozone might have vindicated both men, but that implosion has not actually happened. Instead, we have companies with big cash piles afraid to invest – the real euro problem – while Mr Osborne chokes off growth. In order to prevent matters from becoming worse, or so he says, he makes thing worse.

None of this is of much help to Mr Swinney. It might prove that an independent Scotland could hardly be worse off than a country tied to Mr Osborne's low-wage, no-growth, no-comfort prescriptions. That hardly aids the Finance Secretary in his efforts to balance his Budget. The damage being caused by the Chancellor now is likely to prove permanent: the problem isn't going away.

Mr Swinney has to cope with a cut in real terms of 3% annually. In that context, his talk of growth and recovery is brave, but unconvincing. Scotland has the British Coalition disease, the austerity contagion that spreads only more austerity.

Talk will not cure it. Then again, nothing Mr Swinney has to say is as implausible as some of the stuff coming from his opponents.

End the council tax freeze? Fine: a continuing freeze is having a horribly distorting effect on local government finance. Now sell that to voters. Forget about police numbers, free prescriptions, university tuition, concessionary travel, personal care? Fine: all of these are "unaffordable". Everything is unaffordable when your income is falling. Now be sure to tell the public that, as with the council tax, they will have to pay more. Then call it what it is: a big, anti-social tax increase and a cut in spending power.

Mr Swinney could sell off Scottish Water, as the lobbyists at CBI Scotland demand. Perhaps this is just the time to dump an asset that can only increase in value as droughts afflict other parts of these islands. Equally, the Finance Secretary could auction Scottish Water's debt, as the LibDems suggest. Could that party's man at the Treasury, Danny Alexander, then guarantee that the Scottish grant would not be cut accordingly? We could call it a LibDem promise.

These fire sales solve nothing. Scotland's public sector workers, with 16,000 jobs gone in a year and still another effective pay cut in the works, are paying the price for Mr Osborne's austerity and helping to balance Mr Swinney's Budget. The difference is that the former has choices and the latter faces the consequences. The truth remains that no devolved administration can "protect Scotland against the Treasury". That will become plain when the real welfare carnage begins.

In 2008, Britain's deficit was 2.7% of GDP; last year it was 8.3%. In 2008, debt-to-GDP stood at 44.5%; last year the figure was 85.7%. In between those dates, banking brought Britain to its knees.

Two facts, therefore, need to be remembered. "Labour profligacy" did not reduce us to this state, as the Coalition likes to pretend, and Mr Osborne is not rescuing us from our plight, as the Coalition would have us believe. When you slash public spending the public ceases to spend.

Mr Swinney knows as much. His curse is to have to manage this mess well enough so that voters are prepared to attempt an independent alternative. That's a very tall order.