At the last Budget the prediction for borrowing over the same period was just £38bn and the Chancellor predicted growth of 2.5%. Now the best guess of economists predicts a decline of 3.7% in 2009 and negligible growth in 2010.

The Organisation for Economic Cooperation and Development (OECD) and the Institute for Fiscal Studies (IFS) reckon that more than half of our record borrowing is due to structural weaknesses in our economic model. In other words even when we come out of recession we will still have problems to address if we are to reduce borrowing to a manageable level.

The OECD is suggesting that much of the past revenue from business & financial services in the City was actually a passing side effect of a “bubble” in that sector and is not a permanent feature of the UK economy as a whole. It was nothing more than a temporary windfall, which will not be repeated.

Consequently the Chancellor has already made it clear that he has £10bn of savings in his sights via “efficiency savings” but that is hardly likely to be enough and about £39bn a year by 2015 will be needed to fill the hole. 

The IFS has estimated that this would mean tax rises or further cuts in the growth of public spending which would be the equivalent to an average of £1,250 for every family in the UK.

A Budget for the current situation will be painful enough, but a Budget for the long-term could be even more painful.