Guardian linky

Basically, it all boils down to an economic constant called a 'Fiscal multiplier" which, in this case, is used to estimate for each £1 that is cut from government spending, how much is lost in GDP. The government (through the Office of Budgetary Responsibility, an independent body) estimate it to be around 0.5 i.e. for each £1 that is cut, we lose 50p of GDP. The IMF estimates it to be anywhere between 0.9 and 1.7 i.e. for every £1 of cuts we actually lose between 90p and £1.70. The TUC reckons it's about 1.3 (thus £1.30 for each £1 of cuts).

Using the 1.3 multiplier, we will lose roughly £76billion from GDP over the period of this government if the government sticks to it's austerity agenda. If you do the maths, using the 0.5 multiplier and the same spending plan, we stand to lose £29billion. If the TUC & IMF are right - The TUC estimate is roughly midrange of the IMF estimate so lets say they agree - George Osborne's policy will cost the UK an extra £47 billion.

That's a heck of a gamble to take.

The multiplier will actually be higher on average than anyone is thinking. Benefit spending has the highest multiplier of 1.7 times. Defence spending has the lowest of 0.4. So it actually makes a lot more sense to cut defence than benefits. Yet this government is targeting benefits so the economy will suffer. Places with high unemployment will suffer most and that will mean that everyone in those areas will suffer. Also the long term plan is to shrink government spending to much less so multiply that into the lost GDP. Osbourne is clueless.