While much of the talk this week has been about the election, far less reported was the news that government coffers will probably be a massive £43bn worse off than expected. This would wipe out the often-quoted £27bn “headroom” built up by the former chancellor Philip Hammond to cope with the costs of Brexit, and overshoot the government’s deficit target by £16bn.

In a break with recent tradition, the Treasury has refused to publish the Office for Budget Responsibility’s autumn check of the economy and public finances. The planned budget has been cancelled too. But the Resolution Foundation crunched the numbers and has now reached this stark figure. The government’s fiscal rules, in effect, have been shot to pieces: rules that have been a centrepiece of successive budgets that have driven cuts in public spending for nearly a decade.

For some, the big story here will be the risk to our public finances and a government that appears to have junked fiscal prudence in pursuit of a pre-election spending spree (chancellor Sajid Javid’s recent spending commitments on hospitals, police and schools amount to £13bn). But it’s wrong to think the answer is more austerity. This was always the wrong remedy for our economy. There were many different ways to get to grips with the public finances after the 2008-9 crash.

The government could have opted to raise rather than cut taxes for those who are well off. Cutting corporation tax from 21% to 19% alone cost the exchequer in excess of £5bn a year. The former chancellor George Osborne could have followed the US and opted for a fiscal stimulus to boost the economy and increase tax receipts. But instead he opted for deep spending cuts that have hammered public services, decimated our welfare system and dampened the economy. The New Economics Foundation’s analysis indicates that this policy has reduced GDP growth every single year since 2010 – and in 2018-19 alone it suppressed the level of GDP by almost £100bn, £3,600 for every household.

So the one thing the government has got right in the past few months is to loosen public spending. But in doing so, it will have to rethink fiscal rules that are no longer fit for purpose.

This takes us to the bigger conclusion from these numbers. The economy is slowing down as the impact of a global slowdown and Brexit uncertainty bites. And this is even before we have left the European Union. This is worrying because it comes after a decade in which the economy has not worked for everyone, and many people have suffered. A protracted period of wage stagnation has squeezed living standards. People in the UK today are, on average, £128 a year poorer than in 2008. Five million UK workers are now in low-paid jobs and facing some form of insecurity at work. Household debt is now higher than it was before the crisis, and a staggering 14 million people live in poverty.

Many people, already under pressure, cannot afford another knock to the economy. The inability to get to grips with these deep social issues when the economy was growing is the real story of a decade of failed economic policy.

The next government must do better. The looming threat of a recession creates the urgent need to tackle these economic challenges head on. This will require a level of investment and government action that we have not seen for a decade. At the same time, we will need to respond to the climate emergency as we a chart a course to reach net zero carbon emissions. More public spending will be required to reach this target.

The current fiscal rules are not fit for purpose, either to tackle the economic or the environmental crisis we face. They are based on an outdated idea of risk that says debt and borrowing should always be minimised when the economy is growing, to ensure there is space to borrow during recession. But we need the government to use its balance sheet to drive change in the economy now. And the current low interest rates create an opportunity to do this in a sustainable way.

The next government must recognise the scale of the challenge we face, and the need for urgent action and investment.

• Miatta Fahnbulleh is chief executive of the New Economics Foundation