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So where do we go from here, Mr. Osborne?

What is really astonishing about the triple A rating downgrade is that nobody, least of all the Chancellor, now has any plausible scenario whatsoever as to how the British economy is going to recover. The Tory Right’s slash-and-burn policy of even heavier welfare cuts will simply undermine demand further (and seriously risk a major political explosion) whilst big tax reductions, since Osborne is now so hemmed in with virtually no room for manoeuvre, have to be matched by similar expenditure cuts elsewhere.

Export prospects are stymied by deepening recession in the Eurozone and the return of instability after the Italian elections and also by the deflationary impact of the US failure to reach political agreement on circumventing swingeing cuts in the public budget. Nor is there any appetite for business to invest the huge stockpiles of corporate cash of £750bn until there is evidence of growing demand, but that is something which Osborne, adamantly committed exclusively to supply-side solutions, will not for one moment contemplate, in effect crucifying Britain on a cross of ideology.

This is not merely a humiliation for Osborne, having pinned his credibility to preservation of the triple A as the justification for austerity. It is a catastrophe for Britain, with the biggest fall in living standards since the 1920s and with no prospect of escape on current policies. Just imagine what the Tories would be saying now if this had happened under Labour. The Chancellor’s position would now be utterly untenable if he were not backed almost universally by a fearful Establishment, cowed by the magnitude of the collapse yet too enmeshed in a failed system to risk radical reappraisal.

Perhaps what alone saves Osborne – for the moment – is a weak opposition unequipped with a dominant alternative ideology backed by mobilisation across the country. It is still possible that some incident – a provocative over-reach by uber-Thatcherite ministers, a big health service scandal or the widespread and shocking reappearance of avoidable poverty – may yet set set light to a conflagration that will rouse the country from its sullen acquiescence. But this cannot go on as we are. It is not the savage austerity of Greece, Italy or Spain, but it is an economic paralysis every bit as deep as Japan’s, if not more so. It will not last.

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