We can see that the worsening public finances during the global recession reflected a collapse in income rather than high expenditure.

Similarly, the improved finances in 2010-11 came on the back of a significant revival in government revenues, not from a reduction in government expenditure.

So when the coalition government came to power in May 2010, the then Chancellor George Osborne actually inherited recovering growth and improving public sector finances.

Failed project, failed Chancellor

Instead of building on this growth, Osborne introduced huge cuts to government expenditure in an attempt to bring the public debt and deficit under control.

The plan failed almost immediately.

As income collapsed in 2012-13 improvements to the deficit were reversed, forcing Osborne to retreat on his spending cuts.

Growth eventually returned thanks in no small part to Bank of England subsidies to the financial sector, but progress was very slow.

In the end it took the Treasury twice as long as to balance the books than he expected.

And because it took so long, the government missed all its targets for reducing the public debt.

Osborne’s mistake was to ignore the link between increasing spending to boost economic growth and the improved government revenues and public finances that result.

It’s taken eight years, but the penny seems to have finally dropped for his successor.

Austerity must end

The Chancellor now needs to embrace the logic of his newfound enlightenment.

He must understand that increased government spending will boost the economy and tackle the ongoing wage growth crisis, and that this will bring higher tax revenues to help cut the deficit.

So far Philip Hammond’s approach to the public finances has at least been better than his predecessors.

Upon taking office Hammond junked the ludicrous balanced budget legislation, and there was no ‘punishment Budget’ after the EU referendum.

And in his latest Budget, he didn’t let a small deficit stand in the way of much needed extra spending for the NHS.

But there’s still a long way to go to undo the damage wrought by eight years of austerity, and last month’s Budget barely scratched the surface.

Now that the logic behind austerity has been junked, we need action that matches the scale of the crisis facing working people in this country.

In the meantime we rejoice that what was once political heresy has become conventional economic wisdom within the Conservative Party.

It’s great that the Chancellor has finally admitted what we’ve long argued.

It’s just a shame that so many workers had to suffer before he got the message.