The Comprehensive Spending Review (CSR) is on its way

Each day since the General Election the Coalition Government has had to borrow an extra £400 million. That's because for every £300 coming in the government is spending £400.

In this financial year that will come to a total of around £150,000 million extra borrowed and added to the National Debt. That level of increase in debt in one year is by a wide margin bigger than any previous year. The Coalition Agreement commits Liberal Democrats and Conservatives in Government to slow down the rate of extra borrowing such that by 2015 we are back on an even keel.

Despite sloppy media reporting, the aim is to stop adding to the National Debt and certainly not to repay it. You can expect the National Debt to be larger not smaller in 2015 despite the CSR - and interest payments on it will still be huge.

The Government's plan already include measures to increase income, including extra tax from banks and big bonus winners, capital gains, and large value pension pots, as well as the VAT rise. Announcements have also already been made to reduce spending, including the income limit on Child Benefit. (See Simon Jenkins in the Guardian, Friday 16th October 2010, for an unexpected endorsement of the 'left wing' financial decisions of the Coalition Government.)

Could the Coalition Government get away with leaving it for a bit? That's what the Greek government hoped. Now they are forced by the IMF and the EU to make far harsher cuts, and with no option to re-balance spending to protect the low paid and vulnerable as the Lib Dems have done here:

• taking 900,000 low paid workers out of income tax by raising the tax threshold,
• bringing in a Pupil Premium for disadvantaged children, and
• restoring the Pensioners' Earning Link on the most favourable terms ever.

That's what Gordon Brown hoped, too. According to Peter Mandelson, Brown overruled his Chancellor last year and insisted that it should be spend as usual, despite Alistair Darling's dire warnings. Even so, Labour did say that big cuts would be needed in the future - they just forgot to tell us what they would be.

So who is to blame? Stern warnings at every stage over the past decade were given by Liberal Democrats in Parliament. Vince Cable repeatedly pointed to the dangers of wholesale bank deregulation, of the risks of an uncontrolled house price bubble, and of the huge rise in domestic debt. He was ignored or ridiculed by Brown right up to the big crash. Labour said that casino banks and massive bonuses were all part of making Britain the financial capital of the world. Now the UK economy has shrunk by 6%, government income has fallen, and public spending has gone shooting up. Labour went on a 'trolley dash' and left us at the checkout on election night to pay the bill. We can now only afford the essentials, and we have to put the stuff we cannot pay for back on the shelf. But we are throwing away the tat as well! There is huge waste and bureaucracy, fuelled by a foolish belief that Whitehall controls and targets were the cure-all. That's all going to go.

How bad will it be? Even after the CSR the size of the state sector will be as big as it was in 2006. We will have a fairer and a freer country than when we started. It is going to be tough for everyone, but it is absolutely necessary.