Anthony Hilton: The economy can only pick up if we become a smarter workforce

The Chancellor also thought it mattered, though he did his best to disguise the fact. As a rule he does not do embarrassment or modesty — at least not in public — but for a few minutes yesterday at the despatch box his normally assured delivery looked distinctly uncertain.

But then the moment passed. He was soon back on track jauntily forecasting further reductions for the rest of the Parliament and crucially re-committing to delivering a balanced budget with a small surplus by the end of the decade.

But the blip underlines the fragility of forecasts so the question is: does anyone still believe him? Given that we appear to have been blown off course in the four short months between his rosy Autumn Statement and the gloomier outlook now, how much credence can we give to forecasts looking five years ahead?

By 2020-21 Government tax and spending will be well over £800 billion a year. The projected surplus is of the order of £10 billion — which is just a fraction over 1 per cent of the money which will be sloshing through its coffers. No business and precious few individuals would attempt to say with that degree of accuracy how much they will be spending and saving in five years’ time. Why then should we expect Government to get it right? There is so much that is beyond the control of Chancellors, and economic growth is uncertain at the best of times.

So why might it go sour? Well, it is nothing to do with leaving the EU because if that happens all bets are off. These figures are put together on the assumption that we stay in, because there is no way of factoring in the effect of such a profound shock and the resultant uncertainty. The effect of leaving would be a bit like a heart attack — you have to experience one to know what it’s like.

Nor is the problem the slowdown in China and the uncertainty in the rest of the world, though again that does not help. Rather, the uncertainties which bedevil the UK economy are very much closer to home.

The clue lies in past Budgets as well as this one. Forecasts produced by the Office for Budget Responsibility regularly predict a strong growth in exports and equally dramatic growth in productivity — the increase in the wealth produced for every hour worked. They are, of course, assumptions but if you accept them as reasonable then it is also reasonable to assume that the numbers will work out as planned.

Unfortunately growth is not happening. The Government forecasted that exports would hit £1 trillion by the end of this Parliament. But as the British Chambers of Commerce laconically observed recently the growth in exports has been so weak that we are likely to miss that target by at least 17 years. So we should not count on too much help from that source.

The second problem is productivity, which, much more than economic growth, is the real measure of whether an economy is doing better. Again in this the UK performance has been lamentable — which is the underlying reason why to make ends meet so many people have two jobs and we work longer hours than most other developed countries.

Unless we learn to work more efficiently — which requires better management, more capital equipment and technology, better broadband, transport, infrastructure and better education and skills — we are simply running faster and faster to stay in the same place. The one really interesting part of the Budget yesterday was the partial recognition by the OBR that this is a problem, and one which is unlikely to be solved quickly. As a result it has revised downwards by 7.5 percentage points its estimate for productivity growth in this decade. That is a lot but is it enough? If not, bang goes the Budget surplus.

That’s the trouble with forecasts. What you get out depends crucially on what you put in. But there again, because it is just a forecast it does not actually matter if it is missed. The economy will be what it will be and we will have to live with it. The only thing really to be affected by the uncertainty is George Osborne’s credibility and with it his chance to become Prime Minister.

Maybe that is why he looked uncharacteristically nervous yesterday.