Biggus,
I agree with your conclusions, but I don't think the plan has ever been to reduce the annual deficit to zero. I believe it' s more like £30bn. Most economies ran a deficit, even in the good times. In the early 2000s when things were going well the UK annual deficit averaged around £27bn or thereabouts, so the plan is to return us to normal and manageable levels of borrowing. It's true this target has slipped by a couple of years.
The loss of MPA was the worst part of the SDSR in my view, and I am uneasy to say the least that there don't appear to be any medium-term plans to resurrect it. The handling of the Nimrod MRA4 project was appalling though, with a financial horror story to boot, which left the system vulnerable to its eventual fate. I just hope we don't get any ideas about small production runs of customised aircraft when we do re-think our MPA stance. That is way too expensive.
Poseidon should be well into its stride by the time we do think again, and ought to be affordable, especially if we can combine our efforts with other European buyers and don't overly customise our specification.