Defeat on Sunday trading in Commons is latest humiliating setback for George Osborne

With the budget fast approaching, George Osborne seems to have got himself into a bit of a muddle.

A few weeks ago George Osborne fired a warning shot from China of the possible cuts to come in the budget. Last week his team briefed of possible changes to pension tax relief, moving away from our current system where richer people get more tax relief. The reaction against this (potentially progressive move) from backbenchers that Osborne will rely on in the leadership battle to come, and even from his own Pensions Minister, was so swift and sharp that Osborne was forced to bow to their pressure and U-turned within days.

With pensions off limits Osborne turned his eyes on fuel duty to raise funds, but this has again been met with howls from his own backbenches. Then yesterday he was defeated in Parliament on something he personally has been trying to push through for some time – the relaxation of Sunday Trading Laws. Osborne must be starting to feel he has nowhere to turn.

But this situation is of Osborne’s own making.

Despite delivering an Autumn Statement just three months ago which promised an increased budget surplus of £10.1 billion by 2019/20, the Chancellor now blames global economic difficulties and slower than forecast domestic growth for these potential cuts and the need to raise extra revenue.

As John McDonnell has said – this is a total humiliation for the Chancellor.

While Osborne is sticking to his message of a ‘long term economic plan’, the reality is that his rhetoric on the economy over the past year has been even more up and down than his budget proposals over the last two weeks.

Before the election Osborne was warning of serious times ahead for the economy requiring £30bn spending cuts, including £12bn savings on welfare, in the coming years. By the summer Osborne was giving a ‘big budget’ with ‘big ambitions’ but which admitted growth was slowing and revised the 2015 forecast down. By November Osborne was touting a miraculous £27bn improvement in the public finances and promised this would allow him to “fix the roof while the sun is shining.”

Now, just three months later we have another twist in the tale as it turns out that the sun isn’t really shining on Britain’s economy at all, inflation, growth and wage forecasts are down, our economy faces ‘a cocktail of threats’, we should expect further spending cuts in the March Budget and Osborne is scrambling around for ways to raise revenue.

Quite apart from the uncertainty that such swiftly changing messaging and policy wreaks on businesses and families, the short-sightedness of the Chancellor on these issues is worrying.

The fact that the Chancellor gave his warning about spending cuts a few weeks ago from the far shores of China is apt, as many have warned that China has been a blind spot for the chancellor for some time. I wrote last summer about the threats posed to the British economy by turbulence in the China, where household debts are soaring, growth slowing and markets periodically crashing.

After spending much of last year courting Chinese investors and fixing the Hinkley Point Nuclear energy deal (which now looks precariously close to collapse after EDF’s Chief Financial Officer has resigned because of the enormous cost of the project), the Chancellor finally seems to have woken up to the dangers. His awakening has probably been helped by warnings from people such as Mark Carney, Governor of the Bank of England, who warned that if Chinese GDP were to fall by 3 per cent relative to its trend then the output in the UK would be around 0.3 per cent lower as a result.

At a time when our manufacturing sector is flat lining, and goods exports are flailing- leading to us having the biggest current account deficit since 1830, when the Duke of Wellington was Prime Minister, taking on any more risk is something the UK economy simply cannot afford. What we need is investment and higher wage growth to stimulate the economy, but what we’ve got is a chancellor that can’t make up his mind about how the economy is doing, and can’t make up his mind about what to put in his budget. Now more than ever we need a chancellor with a sensible and steady course. Unfortunately, for all his rhetoric about a ‘long term plan’, that’s certainly not Osborne.