One question has not been settled during George Osborne’s time as Chancellor of the Exchequer. Does he want to shrink the state in order to balance the books, or vice versa?

The answer matters. It would tell us whether the second most powerful man in the country is an inflexible ideologue or a pragmatist capable of altering course as results and reality dictate. The evidence points to a troubling conclusion: Mr Osborne is a bit of both.

Despite appearances, he is not wedded to the ideology of the minimal state. He has missed, scrapped, or “revised” targets for the budget deficit time and again, and done so shamelessly. Yesterday, he abandoned what would once have been termed a flagship policy – for the reform of tax credits – without the hint of an apology.

The Chancellor nevertheless has a clear end in view. The United Kingdom he means to establish would see the public realm retreat and the private sector advance to an extent unprecedented in modern times. In his statement, he spoke of a state share of GDP at 36.5 per cent as a modern, “sustainable” benchmark. In reality, an 8.5 per cent fall from the historical average marks a profound shift.

Mr Osborne boasts of such facts in one breath; in the other, he dodges. Yesterday, he appeared to slacken purse strings thanks to an economy returning to health. In reality, he was trading on sharp accounting. His appropriation of the asset value of housing associations has, allegedly, improved the national balance sheet. Meanwhile, Office for Budget Responsibility (OBR) projections allow him to treat the future as the present. So the Chancellor can “spend” a billion here or there.

There is a problem or two in this. First, the OBR’s forecasting record is awful, especially when it comes to tax receipts and deficit figures. Secondly, Mr Osborne’s ability to peer into the future is questionable. Just five and a half years ago, he predicted that yesterday’s statement would mark the end of the UK’s deficit. In reality, we are not yet half way there.

Thanks only to the questionable annexation of housing-association book value, and to the OBR’s helpful view of tax receipts, debt is forecast to be 82.5 per cent of the UK’s GDP rather than 83.6 per cent. From this, Mr Osborne’s largesse flows. Thanks to this, he will not be the Tory leadership candidate who cuts “real terms protection” for the police, alienates pensioners, or angers underpaid working “strivers”.

Given that he and David Cameron have “protected” around 60 per cent of departmental spending with guarantees for health, education, overseas aid, pensioners, defence, the Foreign Office (as of yesterday), and much else besides, the Chancellor has painted himself into a corner. Reheated promises on housebuilding and “progressive” intent will not help. So Mr Osborne returns, time and again, to a £250 billion welfare bill.

Much of that is for untouchable pensioners, many of whom happen to vote Tory. Much of the rest is hard to nominate if you realise, finally, that punishing the working poor is bad politics. Where does the Chancellor go next if he intends to have his party accepted as “the mainstream representatives of the working people of Britain”? Raiding the incomes of prospective voters does nothing for your election chances, or your tax receipts.

Yesterday, Mr Osborne was pugnacious. An incoherent official Opposition counts as a stroke of luck, but his creative accounting is becoming obvious. Year after year, the Chancellor kicks the can of debt and deficit down the road. When he decides to squeeze business – with an apprentice levy and other measures – nature’s Tories grow restive. Then what?

If the rosy hue Mr Osborne claims to see at the road’s end was dawn’s light, much would be forgiven. We have heard that song before, however. The abandonment of tax-credit reform yesterday was an ideologue’s surrender, and a victory for common sense. What lesson will a pragmatic Chancellor take? Try this: he has just shown himself to be doggedly wrong, for months on end, to the tune of £4.5bn.

For reasons inadequately explored, the OBR nevertheless sees grand times ahead for tax receipts and growth. Mr Osborne meanwhile banks, in billions, on low inflation for years to come. He and an independent office are, magically, again, in tune. Still the melody sounds like an improvisation: on fiddles.