Ian McConnell: 'A bit like a modern-day version of the Rumpelstiltskin fairy tale for George Osborne'

However, just as there were disadvantages as well as benefits for the miller’s daughter in her dealings with Rumpelstiltskin, the OBR’s forecasting will over time bring significant minuses and pluses for Mr Osborne.

The negatives were certainly to the fore for the Chancellor yesterday as the OBR published revised projections after weighing up economic developments since the autumn statement.

It reduced its forecasts of UK growth in coming years sharply, and raised its projections of how much the Chancellor would need to borrow by tens of billions of pounds.

Back in November, you would imagine that the OBR’s forecasts that tax revenues would be greater than thought and the costs of servicing the national debt lower than expected must have been a very significant relief for the Chancellor.

After all, this £27bn windfall came at a crucial time for Mr Osborne, given he had been unable, through his own labours, to deliver a balanced and convincing UK economic recovery, with his scale and mix of austerity continuing to weigh on aggregate demand.

If Mr Osborne was disappointed by the OBR’s downgraded growth and higher borrowing forecasts yesterday, he did a good job of hiding this as he attempted to paint a picture of a UK economy that was performing relatively well.

He noted the OBR had revised down the UK’s potential productivity growth, while seemingly at pains to emphasise this was a problem “across the West”. And, once again, he attempted to focus on international factors, and appeared to be in no doubt about the wisdom of his policy-making, when alluding to challenges ahead for the UK economy.

The OBR yesterday cut its forecast of UK gross domestic product growth for 2016 from an already below-trend 2.4 per cent in November to just two per cent. It reduced its projection for expansion next year from 2.5 per cent to 2.2 per cent.

For 2018, it is now forecasting growth of 2.1 per cent, compared with 2.4 per cent at the time of the autumn statement. And it has cut its growth forecasts for both 2019 and 2020 from 2.3 per cent to 2.1 per cent.

In short, the OBR is forecasting growth way below the UK’s long-term average annual rate, which has been put by Bank of England Governor Mark Carney at about 2.75 per cent, all the way out to 2020.

Such weak growth over so many years is an unappealing prospect indeed, and hardly bodes well for under-pressure households.

The UK economy grew by 2.2 per cent last year.

Recent economic surveys have indicated growth may have slowed in the opening quarter of this year from a below-trend rate of 0.5 per cent in the final three months of 2015.

The manufacturing sector has been particularly weak in recent times as UK growth, such as it is, has been driven by the services sector and consumer spending.

Mr Osborne’s March 2011 Budget vision of “a Britain carried aloft by the march of the makers” has certainly failed to materialise.

While the OBR’s sharply-reduced forecasts for growth yesterday underlined the weakness of the UK economy, there was still a bit of a gold lining for Mr Osborne, in terms of further reductions in its projections of interest payments on public sector debt.

In this context, the OBR cited further falls in market interest-rate expectations.

And it noted that its forecasts of debt interest spending had been reduced by an average of £4.9 billion-a-year from 2016/17 onwards.

This relief on the debt interest payments front was not enough, however, to prevent the OBR’s forecasts of public sector net borrowing rising very significantly.

The OBR is now forecasting public sector net borrowing of £55.5bn in the 2016/17 fiscal year, up from its £49.9bn projection in November.

The net borrowing projection for 2017/18 has been hiked from £24.8bn to £38.8bn. And the forecast for 2018/19 has been hiked from £4.6bn to £21.4bn.

The OBR is forecasting Mr Osborne will achieve a surplus on the net borrowing measure of £10.4bn in 2019/ 20. This is similar to the £10.1bn surplus it projected for 2019/20 back in November.

Outstanding public sector net debt is forecast to rise from £1.591 trillion at the end of this month to £1.725 trillion by March 2020.

In line with the softer UK picture, Strathclyde University’s Fraser of Allander Institute earlier this month cut its forecast of Scottish growth in 2016 from 2.2 per cent to 1.9 per cent. It reduced its prediction of expansion north of the Border in 2017 from 2.5 per cent to 2.2 per cent.

It also warned that Scotland’s future growth would be threatened if the UK were to leave the European Union.

Mr Osborne was at pains to emphasise yesterday that the OBR projections for the UK economy assumed the country remained a member of the EU. And he emphasised his support for continuing membership.

Fraser of Allander had urged Mr Osborne not to adopt further austerity.

Professor Brian Ashcroft, economics editor of the think-tank’s regular commentary, has noted Mr Osborne’s determination to have a budget surplus by 2020 sets the UK apart from other advanced Organisation for Economic Cooperation and Development member countries.

And Mr Ashcroft believes this approach “seems to fly in the face of economic reason”, and has warned: “The more you take out of the economy, the lower the tax receipts are, so you are chasing your tail.”

This comment seems, in many ways, to sum up Mr Osborne’s economic track record. But, true to form, the Chancellor tightened the fiscal screws further yesterday announcing billions of pounds of further public spending cuts, in spite of various warnings against such action.

Unfortunately for the Chancellor, the disappointing UK economic growth which has prevailed for much of his period in office is not going to disappear as quickly as Rumpelstiltskin did, for a swift “happy ever after” ending.

As far as the OBR can see, right out as far as 2020, UK growth is forecast to remain weak.