In today's budget, George Osborne sets out a path for the government's fiscal deficit over the next five years. His aim is to get the overall budget into surplus by 2019/20. This is one year later that planned back in March - a welcome smoothing of the path for eliminating the government's deficit. But he may still be moving too fast.
Given his track record in the last parliament, there is a case for not paying too much attention to the Chancellor's latest targets. His June 2010 budget proposed a reduction in public sector net borrowing from 10.1% of GDP in 2010-11 to 2.1% in 2014-15, but the outturn for 2014-15 was 4.9%. As a result of persistent borrowing overshoots in the last five years, net debt was 80.5% of GDP in March 2015, and still rising on an annual basis, compared to the June 2010 projection that it would be 69.4% and falling.
Some of the Chancellor's other budget pronouncements have turned out equally badly. In March 2011, he promised a 'march of the makers' to rebalance the economy back towards manufacturing. The latest figures show manufacturing output in the first quarter of 2015 was still 5% lower than seven years earlier, just before the economy went into recession. The output of the service sector is up 9% over the same period. And in March 2012, he set a target for exports to double to £1trillion by 2020. The latest figures show that in 2014 exports were £507billion, just 2% higher than in 2011.
As these figures illustrate, the economy may be growing at a healthy rate again - real GDP was up 2.9% over the last year - but the recovery is very unbalanced. In June 2010, the Chancellor hoped rapid reduction in government borrowing would be offset by stronger exports and a big surge in investment spending. Neither occurred on the scale hoped for. Instead, the pace of deficit reduction had to be scaled back and the recovery has relied for growth on households saving less and borrowing more.
The latest figures show households' saving rate fell to 4.9% in the first quarter. This is the lowest rate since the third quarter of 2008, when it was 4.6%. Records go back to 1963 and only in the second quarter of that year has saving been lower.
One of the failings of the Chancellor's 'long-term economic plan' is that - despite his occasional rhetoric (there was no special mention for manufacturing or exports in the budget speech) - it is indifferent to the build up of imbalances in the economy. This is starkly illustrated by the Office for Budget Responsibility's latest forecasts.
The OBR is constrained to assume the government will achieve its targets for government borrowing and naturally unwilling to forecast anything other than continued growth in real GDP at close to its trend rate. Given these limitations, it can only make the numbers add up by forecasting household debt will increase from 147% of disposable income in 2015 to 171% in 2020.
The Chancellor makes much of the need for the government to reduce its debt quickly - to 'fix the roof when the sun is shining' - so the government is better placed to respond the next time the economy falls into recession. But the OBR forecasts make it clear this can only be achieved at the pace the Chancellor desires, while keeping the economy growing at a reasonable rate, if households take on debt at a faster pace than they were doing prior to the financial crash.
Ironically, then, the Chancellor's efforts to fix the roof are creating the very storm clouds on the horizon that he fears. Cutting the budget deficit has ramifications for what happens in other parts of the economy. There is a balance to be struck between the pace of deficit reduction and the capability of the economy to respond, in terms of stronger exports and investment, in a way that avoids the need for more household debt to sustain growth. Today's budget does not strike the right balance.