George Osborne is the curate’s egg of British politics. He fiercely resists the Eurosceptic fantasies of the Conservative right and stands firmly alongside the prime minister in making the case for Britain staying inside the EU, a brave career move given the Tory party’s fevered internal politics. Within his self-imposed constraints, he has tried to preserve spending on science and infrastructure. Despite his tough talk, he has shown a welcome flexibility in meeting his targets for lowering the public deficit. He even managed to smuggle through long-overdue tax increases in his budget last July. So, good in parts.

But 10 days away from a second important budget, he remains wedded to a way of thinking about the inter-relationship between government and the wider economy that would not pass muster in an economics GCSE. The sequence of remarks he made in a BBC interview at the G20 meeting last month in Shanghai are just plain wrong. “The country can only afford what it can afford,” he declared. Wrong. Governments may have budget constraints, countries are different. And, in any case, affordability is not an absolute but contingent on interest rates and expected growth. Affordability at near zero interest rates is different from affordability at 10% interest rates.

Then came “storm clouds” and the “economy is smaller than we thought” and “we’ve got to root our country in the principle that we must live within our means” in order to ensure “economic security”; Mr Osborne felt he had to cut government spending again towards the end of this parliament. Wrong. This will make the storm clouds more threatening, only partially mitigated by his promise to soften the blow through focusing on “efficiency savings” and perhaps reducing or deferring the target for the budget surplus.

Nonetheless, it was an unnecessarily disconcerting thing to say. To cap it all, he declared that “the last time we didn’t live within our means we were right in the front rank of nations facing economic crisis”. Wrong. The banking crisis developed independently of government fiscal policy.

Three fundamental errors underpin his worldview. The first is that he conflates country and government and defines living within our means wholly in terms of the government’s finances. Yet Britain’s international trading position is ominously in the red, running a current account deficit of 5% of GDP and set to rise. Exports stagnate, imports boom. This really is living beyond our means, but about which the chancellor says zilch.

Instead, he makes matters worse, selling government assets such as the Green Investment Bank or, last year, Eurostar to foreigners, so that more interest and dividends flow overseas. One of the concerns about Brexit is that foreigners holding sterling will realise that the country is not credit-worthy and there will be a flight of capital. Mr Osborne can hardly not know this, but he continues blithely to define living within our means as a government challenge, rather than a wider challenge to the entire public and private sector.

Second, there are choices about how governments choose to balance expenditure and revenue. The Institute for Fiscal Studies’ illuminating green budget shows that by 2019/20, public expenditure outside health will fall to the lowest proportion of GDP since at least 1948. Between 2010 and 2019, spending by the Ministry of Justice will have nearly halved. The Department for Business, Innovation and Skills’ spending will have fallen by just over 40% and the Home Office by just less.

These are breathtaking figures. They imply the emasculation of innovation, of prison, probation, court and security systems, alongside an assault on local government. This gets into the very marrow of our civilisation: for example, London’s royal parks, to raise revenue in this absurd framework, will have to turn themselves into ongoing circus and event spaces to fund themselves.

Does this very rich country want or need any of this? All because of a stubborn refusal to countenance all but closet tax increases. The government will receive £47bn in excise duty on alcohol, fuel and cigarettes this year. Forty years ago, it raised nearly the equivalent of £80bn. Some of the shortfall is because, thankfully, we smoke less, but most of it is because taxation on alcohol and fuel has been scaled back. The government does not even countenance a sugar tax. The latest news is that the chancellor has shelved plans to raise taxes by withdrawing allowances for richer pension savers – a stealth tax – because it has been seen through for what it is. He should just be upfront. Taxes on alcohol and on fuel are too low; equally, there should be a tax on sugar. Raise them and crucial public services can be saved.

But perhaps the most egregious error is to define economic security wholly in terms of government book-keeping. The financial crisis had nothing to do with public expenditure and public deficits and everything to do with the way global banks had extended vast amounts of credit to dodgy borrowers with very little core capital of their own to act as a buffer. Mr Osborne is busy relaxing the already not very onerous proposed reregulation of our banks. It is a City commonplace that sooner or later there will be another financial crisis because the system’s failings have not been addressed. In these terms, turning Regent’s Park into an events space and our prisons into hellholes will not increase our economic security one iota. True economic security requires a wholesale reinvention of how companies are owned and financed, of how our banks are run and how innovation is supported.

Readers will note that this column is a critique of the way Mr Osborne has exerted sovereign economic power within our EU membership. We do not need to leave it to change policy, nor have Mr Osborne’s choices been constrained by membership. He knows that too. To put so much trade and investment at risk while threatening the capacity of the EU to hold together in order to chase a chimera of absolute sovereignty is folly. Only in the Conservative party could such a statement of the obvious be seen as brave, but Osborne, on this issue, is just that.

Shadow chancellor John McDonnell might mark and learn. Nothing is easier than attacking Osborne economically. Harder and more important is to recognise that on the EU he is right and to make outspoken common cause, sharing platforms with unflinching solidarity. Momentum, the grassroots movement of Corbyn supporters, will like it no more than the denizens of Rupert Murdoch’s parties, but there come moments in political lives when great politicians have to stand up and be counted. Now is one of them.