Whatever the Chancellor says today, everybody knows that this is a phoney Budget. Like the 'phoney war' of late 1914, the true horrors are yet to come. The real, blood and guts, Budget will come at the end of June, after the election is out of the way.

The Chancellor will certainly bask in one ray of sunshine – the economy looks a bit less dire than he predicted last November. Businesses have held on, and tax receipts have held up. Job losses have not spiked, so nor have benefit costs. Inflation is moderate. All that paper – or rather, electronic – money that the Bank of England created has definitely had its effect. So the Chancellor will not have to borrow as much as he feared. He may even have room to toss us a few eye-popping pre-election sweeteners.

But you cannot keep cloning funny money for ever. The pound has already plummeted. And we are also lumbered with a national debt that stands at wartime levels, and is scheduled to increase year upon year upon year, as far as anyone can predict. We have borrowed to pay off yesterday's bills with tomorrow's earnings. The interest payments on our debt mountain will soon be more than the defence budget. if we had not borrowed so much, we could slash income tax by a third – and grow our way out of the financial crisis.

Britain is a mature economy, its debts are long-term, and the bailiffs aren't going to demand that everything is repaid tomorrow. So talk of us having to go cap in hand to the IMF may be exaggerated. But the interest and repayment burden is going to be with us for years – indeed, for decades. We face the awful – 1970s revisited – prospect of our own debt-laden economy lying stagnant as China and others race ahead of us. Things won't get worse, they just won't get better. We probably won't even notice it happening, but we will slip down the league of economic powers.

Raising taxes would be counterproductive, prompting even more wealth- creators to leave the country. The only way out is deep cuts in public expenditure. But then public expenditure has increased by a third since 1997 – and has all that bought us anything worthwhile? We need nothing less than a complete re-think of what government exists for, and which parts of it we want to keep and even expand. But there is room for very large savings in departments, quangos and programmes that have simply grown, but which deliver little of value.