How do we make sure this time is different? How do we secure a lasting recovery and an economy that works for all? The answer is by sticking to our economic plan. It has three parts.
First, we have to carry on cutting Government spending to get the deficit down and start living within our means. We've already cut the deficit by a third, and the recent spending round continues on that path. We have also shown something very valuable - that you can cut spending while improving services. What too many on the left don't understand is that the people who suffer most from the destabilising consequences of unaffordable spending are the poorest and most vulnerable.
The second pillar of our plan is monetary activism to support demand. Opponents of our deficit plan argued that slower-than-forecast growth was a direct result of government spending cuts, but now that growth is accelerating what has changed? Not our deficit plan. In fact it is precisely because we stuck to our spending plans that monetary activism has had the space to work. In other European countries a loss of fiscal credibility led to tighter monetary conditions. Here in Britain fiscal credibility allowed us to launch successful schemes such as Funding for Lending. And monetary activism doesn't end there. The second phase of Funding for Lending will target small businesses and our Help to Buy scheme is already backing that most natural of aspirations - to own your own home - by improving the availability of mortgage finance.
In a fortnight the Bank of England will answer my request in this year's Budget to examine the case for guidance on the future path of interest rates. In other words, can more certainty for families and businesses about how long interest rates will stay low help to support the recovery?
The third pillar of our plan is the most important if we want to build a new economy that works for all - structural reform that backs aspiration and equips our economy to succeed in today's global race.
Government policies really can make a difference to who benefits from this recovery. Consider some other official statistics released in recent weeks: inequality is at its lowest for 25 years and disposable incomes grew by 1.4 per cent above inflation last year despite the squeeze, the fastest for three years. Both of these facts are in part a direct result of decisions by this Government, in particular to prioritise record rises in the tax-free personal allowance, increase the value of pensions, and freeze fuel duty and council tax.
David Fuller's view It has been a long, hard and discouraging struggle for George Osborne, during which he has been widely criticised. However, he is at least partially vindicated by the current recovery, which was not purchased at the cost of ever more government debt and an explosion in unnecessary and largely unproductive additional public sector jobs.Back to top