The bit that has not gone well for the Chancellor is the fiscal side. In the last budget he aimed to bring public borrowing this year down by some £12bn compared with last year. After seven months of the financial year it is instead running almost £4bn higher.

As it is, to meet the Government’s objective of eliminating the structural current deficit within five years, several more years of austerity lie ahead. The arbiter of what the Chancellor is able to do is the independent Office for Budget Responsibility (OBR), Osborne’s own creation, but now his overseer-in-chief. One of its main tasks is to determine (that is guess) how much of the deficit is cyclical, that is to say, how much will melt away as the economy continues to recover,

and how much is structural. This hinges on an assessment of the

so-called output gap, i.e. the amount of spare capacity, and the sustainable growth rate, both of which are unobservable.

The OBR could say that since the economy has grown faster, and GDP has been revised up, there is now less spare capacity left to be used up. That would be a major blow because it would imply that more of the deficit was structural, thereby increasing the scale of the fiscal tightening necessary to balance the budget.

Fortunately, I suspect that the OBR will instead conclude that the capacity of the economy is now greater than it feared. This increase could offset the effects of higher GDP, thereby leaving its estimate of the output gap more or less unchanged.

Mr Osborne has made much of the notion that he has been able to reduce the deficit and still the economy has been able to enjoy a decent economic recovery, thereby apparently confounding all those Keynesian critics, ranging from the IMF down to yours truly, who warned that the pace of deficit reduction would restrain the growth of demand.

But all is not quite what it seems. It was striking that the planned pace of deficit reduction and the austerity measures that facilitated it moderated sharply in 2013 and 2014, conveniently just before the election. And, as it happens, this year’s poor tax receipts mean that there has actually been an inadvertent fiscal expansion, which, by the way, has coincided with the pick-up in the economy. It would be well not to be complacent about the ability of the economy to withstand another burst of really tough fiscal tightening.

Why have the borrowing figures remained so high? It is not that government spending has risen any more than expected. It is a case of revenue from income tax falling short. This is because so much of recent job creation has been in low-paying jobs. The tax hit from this factor has been exacerbated by the increase in the tax-free personal allowance to £10,000 per annum.

Both the Conservatives and the Lib Dems are planning to increase this allowance to £12,500 by the end of the next Parliament. This sounds impressive as it will take more people “out of tax altogether”. But, quite apart from the extent of the fiscal shortfall that this will impose, it is far from clear to me that taking people “out of tax altogether” is entirely a good idea. It implies, of course, that a larger tax burden falls on others who find, surprise, surprise, that they are still “in tax … altogether”. Moreover, by reducing the number of people who pay tax it also reduces the number of people who have an incentive to vote for governments that will restrict their spending.

The awkward truth is that however attractive a particular tax gimmick might seem, unless government spending is reduced, it will merely transfer the burden somewhere else. Although in some ways, the squeeze on the public sector has been intense, you can easily argue that it has been nowhere near intense enough. The latest figures show that over the year to October, total government spending was up by 2.2pc. Spending on social benefits was up by 2.9pc.

Meanwhile, under the cosh from the European Commission, Mrs Merkel and the markets, the beleaguered countries of the eurozone have managed something quite remarkable. In Ireland, since its peak, government spending has fallen by more than 30pc. The comparable figures for Spain, Portugal and Greece are 7pc, 8pc and 16pc. (Admittedly, all these countries’ debt-to-GDP ratios have still risen sharply because their economies have contracted, but that is another story.) Now that’s what I call austerity. If a future Conservative-led government wants to make a radical reduction in taxation then it must deliver a radical cull of the public sector. Goodness me: have I finally discovered a reason for the UK to join the eurozone?

Roger Bootle is executive chairman of Capital Economics

roger.bootle@capitaleconomics.com