Economy - The day the hole we are in gets bigger

Update: 1415 GMT The OBR forecasts that the government's deficit reduction programme suggests a total cut by 2017 in the number of public sector employees of around 710,000 (from a previous figure of around 400,000).

Update: 1400 GMT This is the statement that George Osborne never wanted to make. It told the country that the government will not have balanced the books by the next election. It spelt out that there will be more pain now, more pain tomorrow and more pain for longer than we'd previously been told. Anyone aged under 52 will have to work another year before getting their state pension.

Anyone who works in the public sector will see their pay fall in real terms even once the current two year pay freeze ends. Any family (without a disability) claiming tax credits will find them frozen and those with children will find that a promised above-inflation increase has been cancelled. This decision contrasts with that to increase out-of-work benefits by over 5%, in line with inflation. It will be presented by ministers as protecting the poor and those unable to find a job but will provoke others to claim that it is unfairly punishing those in work.

All this was necessary to ensure that the government would not breech its own deficit targets, to pay for a series of measures designed to boost growth - to spur the housing market; to increase investment in infrastructure; to help the young unemployed; to pay for today's promise to double the help given to deprived families with two year olds for their education and child care; to curb the increases in rail fares and to limit the increases in petrol duty.

The Chancellor will not have enjoyed delivering his Autumn Statement but George Osborne knows that there may be worse to come in next year's Budget.

Update: 1215 GMT: You can follow my updates on the Autumn Statement as part of the BBC News website's special live coverage of the event.

Preview: 0800 GMT: "Shocking" is the word used by one of those who has seen the official economic forecast which will be published today.

"The light at the end of the tunnel is receding" says another.

The reason is that the new independent official forecasters at the Office for Budget Responsibility will today increase the size of the budgetary hole they say we're in.

The OBR has calculated that the British economy has shrunk much more than it had previously thought. In other words, the banking crisis of 2008 has made a bigger permanent dent in the economy than previous estimates.

As a result the so-called structural deficit - the bit of the deficit which cannot be eliminated by growth alone - is bigger.

It's this calculation which means that the chancellor will say that although he's sticking to Plan A - that is, he is not choosing to spend or borrow more to stimulate growth - his plans will not clear the deficit until 2016/7 - that is after the next election.

George Osborne will say that he will still meet his carefully written fiscal mandate which includes what some call "his flexible friend" - a five-year rolling target for eliminating the current structural balance which allows him to start the clock on that measure now and not at the time he assumed office.

Less easy to get round, though, will be the prime minister's words at last year's CBI conference.

"In five years time we will have balanced the books," he said.

Nick Robinson, Political editor Article written by Nick Robinson Nick Robinson Political editor

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