So how bad might the next year or two be for the UK economy? Quite bad is my answer. What should policymakers do in response? Let corrections work their way through. The UK must move towards higher savings, a smaller external deficit and a more efficient public sector. These shifts are painful, but essential. They should not be thwarted.

This year’s characteristically excellent Green Budget from the Institute for Fiscal Studies, in collaboration with Morgan Stanley, reveals the challenges ahead.