Gloomy picture: George Osborne warns 2014 will be the 'year of hard truths'

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Chancellor George Osborne Photo:

The Chancellor, as we are often reminded, had the benefit of a public school education.

It almost certainly included Rudyard Kipling's romantic Edwardian exhortation to the Empire's leaders of tomorrow "If". Here are the first few lines:

If you can keep your head when all about you

Are losing theirs and blaming it on you

If you can trust yourself when all men doubt you

But make allowance for their doubting too ...

– Rudyard Kipling

Stirring stuff, and perhaps the sort of thing that keeps George Osborne going. For today he is striking a remarkably negative note about the economy.

On the face of it he should be celebrating growth accelerating at the fastest rate if any major player in Europe. Unemployment is dropping like a stone. Economists are competing to give the rosiest forecasts for the year ahead and three separate surveys of businesses this morning report that companies are the most optimistic they've been for years.

Yet in a speech this morning in Birmingham the Chancellor will warn of more austerity.

2014, he will say, is to be "a year of hard truths," and "we've got to make more cuts" to reduce the government's borrowing and, eventually, the country's huge debt pile.

UK unemployment fell by 99,000 between August and October 2013 to 2.39 million Credit: Press Association

Those cuts will come from welfare, things like removing housing benefit from the under-25s and restricting council housing to people earning less than £65,000 a year.

But Paul Johnson of the Institute for Fiscal Studies warns that all government departments beyond education and health will have to slash their budgets by a fifth over the next five years to meet Mr Osborne's aims. This austerity-to-come will be eye watering.

Labour blames the Chancellor's "failure on growth and living standards since 2010 [which] has led to his failure to balance the books."

Mr Osborne has never been the most popular of politicians. He may well need a copy of Kipling's poems by his bedside.