The story we are all supposed to share in the election campaign is that this year, next year, or sometime, but not never, the economy will recover.

Not only will this be good for employment and our prosperity, but for reducing the deficit. And we need the recovery to help with this, by increasing the tax take and reducing welfare payments. If the present deficit is about £170b., we can on this analysis reckon that it will reduce to about £70b. provided we are indeed helped by the recovery. So we only have to think about a reduction of the so-called core deficit – say £70b.

The precise figures don’t matter. What matters is that we behave as though this analysis is right, and so the argument is only when the serious reductions should start, whether they will be on health or transport, how much tax will have to go up. And we all assume that any government, Labour or Tory or coalition, will have to face up to the same problem in much the same way, however much ducking and weaving there was during the television debates.

But can we both have a recovery and cut the deficit? As the Labour party has pointed out, without drawing the long term conclusion, cutting back now may indeed imperil the recovery. But won’t it do the same whenever we do it, in say 2010/2011? The recovery is not something that just happens, on some jovial assumption that what goes down must come up. It happens because aggregate demand increases. But the prospects for aggregate demand are much worse if, as the deficit reduction plan must do, taxes increase and public expenditure goes down. In the 90s, consumption went up because of easy credit. But we are not going to do that again, are we? So two of the biggest components of demand are not going to give us a recovery. Thank heaven, we have devalued, so our exports can do better. And probably they will. Enough? What about restoring stock levels, and private investment? Those will indeed go up if there is a recovery. But what about if there isn’t a recovery because both consumption and government expenditure are down?

This is a very unpromising basis for forecasting a good recovery. The problem is that if we cut to reduce the deficit, we may increase the deficit we are trying to cut.

It is possible to do a forecast which shows the economy successfully walking the knife edge, so that we get both growth and sound finances. But it is hard. The latest EEC forecast doesn’t say that this is what will happen. It suggests that the recovery will be fragile and the deficit remain high. Economic forecasts are unreliable. But it may be hard to write a plausible optimistic scenario.

In the election, we implicitly accepted that we had to take the medicine to cure the deficit disease. And that if we do take it, we would get growth sometime again and all will be well. But it is hard to see how this will happens. And hard to know the political consequences if it doesn’t. This is the biggest question in terms of the economy. And we never talked about it.