The last seven years has been an experiment in politics; testing a hypothesis about whether you could cut your way to growth. Philip Hammond’s budget suggests that you cannot. The government’s argument has been that only a programme of rigid deficit reduction and public spending cuts would heal a sick, bloated economy. The damaging consequences of that strategy were laid bare by the Treasury today. Rolling back key public services and declining to invest for the future has meant the economy is smaller than it was forecast to be. Even worse, it has become enfeebled, unable to grow as fast as it historically has done. The result is a poorer, more indebted British state less able to act in the name of economic justice: the higher pay pledged to low-paid workers by the government under the national living wage scheme won’t now materialise when ministers had promised. The UK has experienced almost a lost decade of stagnating wages and shrivelling the state. It is true that Mr Hammond can say that the economy is now recuperating. But the nation has not recovered its pre-crisis vigour. Nor can the chancellor say when, or if, it ever will.

This budget represents a missed opportunity for Mr Hammond to reset the narrative and build up much-needed political capital with his own side by signalling a new direction about where the government is going. What he did in an hour-long speech was to please neither the state-shrinkers on the Conservative backbenches nor those critics who suggest he should fire up growth with the big bazooka of public spending. Instead the chancellor produced a pea shooter: announcing the only post-election giveaway budget since the millennium by borrowing an extra £14bn over the next five years. More cash for an industrial strategy, infrastructure investment and hi-tech research should be welcomed. As should Mr Hammond’s attempts to tax internet giants, which contrasts with his silence over the recent revelations of offshore tax avoidance.

However, in three politically sensitive areas Mr Hammond has made a large statement about the government’s values which reveal how little they might be shared with the public. That Brexit preparations will cost the taxpayer more than the promised extra cash for the NHS appears to underline just what a wasteful and exhausting exercise leaving the EU will be. On housing, seen as the key issue of intergenerational fairness, Mr Hammond signalled – in rhetoric – a charge forward; only – in detail – to retreat. So there is a “review” of land banking, a “consultation” on private tenancies and a “taskforce” set up on homelessness. Such is the vague nature of Mr Hammond’s plan that the Office for Budget Responsibility cannot say that any of it will help increase the supply of houses. The chancellor says he wants to “revive the dream of home ownership”. But in this budget he has willed the end without the means. Mr Hammond will no doubt be praised by his own side for the cut in stamp duty. It will probably be enough to save his skin. The tax cut is a case of good politics rather than good economics – as the OBR points out, it will simply raise house prices.

What the chancellor should have done is to accept that the public sector deficit is the wrong target for policy and end his own party’s obsession with austerity, which has led to politicians endlessly debating debts and deficits with little regard for the human costs of their decisions. What Mr Hammond needed to recognise was that the economy, struggling due to Brexit headwinds and stagnant productivity growth, required a tangible boost. That meant higher levels of public investment. With interest rates close to zero and both public and private sector investment at historically low levels, the chancellor should have reversed the policy direction of the last seven years. Tories have argued since 2010 that such policies would have led to higher taxes or higher debt and that this would inevitably lead to lower future growth. Yet it was the Tory policies of deficit reduction that produced lower growth and higher debt.

This was a moment to have seized. Voters have been telling politicians the promise of higher living standards has been broken. Beset by increasing levels of insecurity in the workplace, their wages going nowhere and the prospect of home ownership receding into the distance, the public are understandably angry. Yet the chancellor chose not to change course. Ahead lie more cuts, notably in welfare. Mr Hammond has plotted a path that will make Britain’s problems bigger and harder to fix.