PHOTOGRAPH BY HANNAH MCKAY/AP

The last time I wrote about George Osborne, the international poster boy for austerity policies, he was celebrating a return to growth in the U.K. economy and declaring victory in his campaign to prove that Herbert Hoover and Andrew Mellon were right, after all. On Wednesday, Osborne, Britain’s Chancellor of the Exchequer and Second Lord of the Treasury, was back in the House of Commons, presenting his final annual policy review before the general election that is due to take place in May. Once again, he reasserted the age-old doctrine of fiscal rectitude. Indeed, he doubled down on it.

One thing you can’t accuse Osborne of is trying to bribe voters. To be sure, he did unveil a couple of preëlection giveaways, including a cut in the excise tax on most home purchases. If he hadn’t pulled one or two Christmas presents out of his hat, his colleagues in the Conservative Party, which is currently trailing the opposition Labour Party in the polls, would have been justifiably outraged. But the main message of his presentation was that a Conservative victory in the coming election would be followed by even steeper cuts in government spending than the ones that he has introduced since taking over, in 2010. “Mr Speaker, our long-term economic plan is working,” Osborne declared in his Autumn Statement. “Now Britain faces a choice: Do we squander the economic security we have gained ... [o]r do we finish the job? ... I say: we stay the course.”

I’ll get to the claim that the Conservatives’ economic plan is working in a bit. But, first, what would staying the course entail? With an election in the offing, the Chancellor didn’t get into the details of which programs would be cut. Instead, he merely reaffirmed his commitment to balance the budget by 2018, and, thereafter, to run a surplus. But the Office for Budget Responsibility (O.B.R.), Britain’s official fiscal watchdog, which has access to the government’s detailed spending plans, filled in some of the blanks with its December Economic and Fiscal Outlook, also released on Wednesday.

Setting aside a few protected areas, such as the National Health Service, Osborne isn’t merely arresting the growth of government programs, which is what modest forms of austerity often amount to: he’s cutting them back, often drastically. “Between 2009-10 and 2019-20, spending on public services, administration and grants by central government is projected to fall from 21.2 per cent to 12.6 per cent of GDP and from £5,650 to £3,880 per head in 2014-15 prices,” the Office for Budget Responsibility wrote. That’s a cut of about third, and it has been concentrated on some of the least affluent members of British society, such as welfare recipients, low-paid workers, and people who use public services like libraries and drop-in centers. And, far from slackening the pace of the cuts, Osborne is looking to step them up during the next parliament, if the Conservatives win. Indeed, according to the O.B.R., fully sixty per cent of Osborne’s cuts are yet to come. [#image: /photos/59095f8d1c7a8e33fb38c6ee]

This isn’t just budget-cutting: it is social engineering on a grand scale. The accompanying chart, which is taken from the O.B.R.’s December outlook, tells the story. If the next government sticks to Osborne’s strategy, the chart shows, over-all government spending as a percentage of G.D.P. would fall to 35.2 per cent in 2019. That’s the lowest figure since the nineteen thirties—before the post-war establishment of the National Health Service and expansion of secondary education and social services; before the aging of the baby boomers, which will put a strain on public pensions; and before the major expansion of tertiary public education that took place in the nineteen-nineties.

I’ve long said that Osborne isn’t merely, or even mainly, a deficit hawk. He’s a roll-back-the-government conservative who, in the aftermath of the financial crisis of 2008-2009, spotted a historic opportunity to complete the work that Margaret Thatcher began. With the deficit soaring to ten per cent of G.D.P. as tax revenues collapsed, and with the spending policies of the Labour Party, which had governed since 1997, being widely blamed for what had happened, Osborne realized that the British public would be willing to accept deep cuts in spending and services—especially if they were targeted at welfare recipients, local government employees, and other folks routinely subjected to vilification in the Tory press. Despite his public protestations to the contrary, Osborne must surely have suspected that his spending cuts (and tax increases) would knock the economy back into a recession, which they duly did. But he was willing to take the gamble, and the political heat, in order to put Britain back on the path to smaller government that Thatcher had laid down.

If the Conservatives get reëlected and the British public sanctions another five years of austerity, Osborne will be able to declare victory in his grand project. Even if the Conservatives lose, he has shifted the terms of public debate so far to the right that the next Labour government won’t be in a position to abandon austerity policies—only to moderate them. The Labour Party’s leadership is desperate to show a skeptical public that it wouldn’t lead Britain back to 2008-2009, and has promised to “balance the books and deliver a surplus on the current budget”—which includes day-to-day expenditures, such as welfare payments, but doesn’t include capital projects, such as the construction of new roads—“and falling debt during the next parliament.”

By boxing in Labour and delivering some of the types of spending cuts that American conservatives dream about imposing, Osborne has shown that he is, by far, the most significant figure in Britain’s coalition government. But that doesn’t mean anybody should take at face value his claim that his macroeconomic policies are working, to which I’ll now return.

On the plus side, the U.K.’s gross domestic product has expanded by about three per cent in 2014, making it the fastest-growing economy in Europe. Osborne’s critics, myself included, didn’t foresee this rate of growth, and neither did the official forecasters. This time last year, the O.B.R. predicted growth of 2.4 per cent.

But the recovery has to be balanced against what went before. After contracting by more than five per cent in 2009, G.D.P. grew at annual rate of less than 1.2 per cent in the four years from 2010 to 2013. Because growth has been so slow, tax revenues have barely risen, and the budget deficit has remained stubbornly high. For the 2014-2015 fiscal year, which ends next March, it will come in at 5.2 per cent of G.D.P., according to the O.B.R. In the United States, which kept its fiscal stimulus going longer and eased off it more gradually, the deficit is already down to 2.7 per cent of G.D.P., or roughly half the U.K.’s level. While the experiment of employing two starkly different policies on either side of the Atlantic wasn’t a controlled trial, and the external circumstances of the U.S. and the U.K. differed, the results were far from a vindication of austerity measures. Orthodox—i.e., Keynesian—policies led to faster growth and a lower deficit.

Among economists, a keen debate is taking place about why the British economy has been able to grow despite Osborne’s austerity policies. Several factors appear to be important, starting with the fact that the economy had a lot of spare capacity and pent-up demand. Beginning last year, Britain’s consumers started to spend more and save less. (In the past couple of years, the country’s personal-savings rate has dipped sharply.) It was this rise in consumer spending, which surprised almost everybody, that sparked the economic recovery.