Britain's Chancellor of the Exchequer, Osborne and IMF Managing Director Lagarde speak to each other at Chatham House in central London
Osborne to Address UK Growth Concerns REUTERS

The economic troubles and debt crises currently affecting Britain, the U.S.A. and most obviously the eurozone are not, according to Chancellor George Osborne, an "act of God" but are the result of human folly and will be solved be human ingenuity.

The root of the problem, it seems, is that the prosperity of this country has been to a large extent an illusion constructed with credit and debt. Sadly reality seems to be catching up with the fantasy.

The massive overspending by the previous Labour government was and is almost universally described by its defenders as "investment". No doubt in some cases this was true yet it betrays a severe misunderstanding of the word.

If one looks at a business, small or large, one can see that there is a place for borrowing money and for debt, but that such arrangements must be taken with care, rather than with the reckless abandon of the previous government.

Borrowing and debt might be legitimately used by a company or government for a number of reasons. For example if a company or government has immediate spending commitments, but will not receive confirmed income from their clients/taxpayers in time it makes good sense to borrow money in order to increase liquidity.

Alternatively a company may need large amounts of money to pay for new equipment that will allow it to make greater profits. This is what could reasonably be described as "investment" as the money spent can be regained from improved production.

Spending large sums on an IT system that does not work, on increasing the salaries of public sector workers, especially for jobs of dubious necessity like climate change officers, is not "investment". Spending more on public sector workers is perhaps the most worthwhile of those commitments, yet such generosity would perhaps best be funded by surplus income rather than with money that has to be paid back.

Sadly this was not done under the previous government and now cuts have to be made. One might wonder if the cuts are happening at all as each new set of figures show the government spending and borrowing more. Indeed it is spending more, more on debt interest payments, meaning there is less money for everything else - hence the talk of cuts at a time when government spending is actually rising.

As a result it now seems inevitable that living standards will drop and most likely we will see the economy shrink, like the Wizard of Oz, from its illusionary greatness to its less splendid reality.

This process of catching up with reality will no doubt be painful for many people, especially in the public sector, however once it has occurred this country must focus on growing its economy in a way that is genuine rather than by endless borrowing.

For this to happen many of those things that impede economic growth must be removed, first among them the restrictions placed on businesses and individuals by a nannying state.

This morning it was reported that a young boy was suspended from his school for selling chocolates and sweets to his fellow pupils. The boy, inspired by "The Apprentice" TV programme, was not disrupting classes or using strong arm sales tactics (as far as we know), he was however breaching the school's "healthy eating" policy.

Such a story perfectly captures the absurdity of modern Britain and demonstrates the mindset that would rather prevent businesses from developing than do anything vaguely un-PC (which apparently now includes eating chocolate).

The same could be said of those aforementioned climate change officers whose job one would assume is to prevent economic growth if it means the emission of more CO2, which it almost certainly would.

One could also point to the absurdity of Energy and Climate Change Secretary, Christopher Huhne, railing against the energy companies for rising energy bills. Perhaps he does not realise that when energy prices go up one of the things that all energy companies do is note that the rise is partly due to the "environmental and social policies" of the government.

Quite how spending so much money on a King Canute style attempt to stop climate change (or global warming as it was known before summer was abolished and freezing winters became the norm) will help our struggling economy to grow is mystery, especially when the main demand of the green fanatics is that we do and consume less of everything.

Rather than spend money on things that inhibit economic growth, the government could use the vast savings it would make on paying off Britain's debt, cutting taxes (thus stimulating consumer activity) and improving the pay and conditions of public sector workers who do actually provide useful services.