The state of the public finances means that the chancellor is not in any position to make pre-election giveaways at the autumn statement next month, writes Larry Elliott

Senior government ministers have been making it clear for weeks that the autumn statement on 3 December is going to be a frugal affair. The message has gone out to voters that they should not expect the giveaways customary for this stage of the electoral cycle. The state of the public finances explains why that is. After seven months of the 2014-15 financial year, borrowing is more than 6% higher than it was in the same period of 2013-14, despite being slightly lower this October than last.

Whoops! Things are not going quite as scripted. At the time of the budget, George Osborne was expecting the deficit to decline by 12% this year, to a little over £85bn. Technically, it is possible for that target to be achieved, but that would require the deficit to be some 40% lower in the last five months of the financial year than it was in the same period of 2013-14.

The recent trends for tax receipts suggest this is not really feasible, and the independent Office for Budget Responsibility will almost certainly revise up its borrowing forecasts for the current and future years on 3 December. In those circumstances, Osborne cannot afford to be generous.

His problem is that the economy is experiencing the wrong sort of growth. While stronger consumer spending has resulted in a pickup in VAT receipts, the take from income tax is down. That’s because employment growth has been concentrated in low-paid jobs and there has been a marked increase in self-employment. Those in jobs paying the minimum wage or a little above are not eligible to pay income tax, while the self-employed can claim a whole host of expenses against tax.

Despite the borrowing overshoot, the Treasury continues to insist that the government’s long-term economic plan is working. It isn’t.

The main element of the plan was to eradicate the structural part of the budget deficit – the bit that would remain even after the economy had fully recovered from the recession – by the end of this parliament. That has not happened. When it came to power in 2010, the government expected to be borrowing just under £40bn in the current financial year. It is on course to borrow something like £100bn.

David Cameron and Osborne are now talking up the threat to the economy from the rest of the world. This is a smokescreen to disguise the fact that deficit reduction has not just stalled but gone into reverse. Only the Treasury would define this as success rather than failure.