A key law the Chancellor made for himself lies in tatters as he admits the UK will now not achieve a budget surplus by 2019/20.
The Chancellor has said the UK's vote to leave the European Union means he will miss a key target - achieving a budget surplus in time for the next scheduled general election.
During a speech in Manchester, George Osborne said the effects of the referendum result meant the public finances would no longer be able to return to a surplus in the 2019/20 financial year as he had hoped.
It had formed a key part of his so-called fiscal rule and was a driving force behind his tax and spending plans which determined the pace of austerity and borrowing levels.
But Mr Osborne admitted he now had to be "realistic" given evidence of economic shock from the Leave vote.
He said: "As the Bank of England said yesterday, the referendum result is expected likely to lead to a significant negative shock for the British economy.
"How we respond will determine the impact on people's jobs and on economic growth.
"The Bank of England can support demand, the Government must provide fiscal credibility so we will continue to be tough on the deficit but we must be realistic about achieving a surplus by the end of this decade and we need to reduce uncertainly by moving as quickly as possible to a new relationship with Europe and being super competitive."
While government borrowing has been falling, there was scepticism about whether the policy was achievable anyway given continued economic weakness overseas - with UK output also easing this year.
The respected think-tank the Institute for Fiscal Studies put the chance of meeting it at 50/50 back in March - given cuts to economic forecasts by the independent Office for Budget Responsibility.
The remarks represent the third major blow to Mr Osborne in the space of a week.
He was a key figure in the Remain camp during the referendum campaign - warning of significant damage to the economy through a vote to leave.
The Chancellor confirmed earlier this week that the result, a week ago, would mean he would not stand for the leadership of the Conservative Party following David Cameron's resignation.
Meanwhile, shadow chancellor John McDonnell has set out Labour's red lines for Brexit negotiations with the EU.
In a speech in London, Mr McDonnell outlined five conditions that should be part of a new deal.
They include maintaining a seat on the board of the EU's investment bank and guaranteeing the rights of Britons living on the continent.
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