What are the police up to?

The Acting Metropolitan Police Commissioner, Sir Paul Stevenson, said earlier today when addressing the London Assembly that what the Met are investigating is a substantial number of leaks from the Home Office which "potentially" involve "national security."

What is he playing at?

Either the leaks compromised "national security" or they do not. Surely he has ascertained by now whether the leaks were just embarrassing information for the government but in the public interest or grave threats to our national security?

Damian Green and David Cameron have strongly denied the leaks have compromised “national security” and have challenged people to explain how they are wrong. Looking at the information Green has published over the last two years, none stands out as putting, in any way, national intelligence, national security or international relations at risk.

What is more, why are the police investigating Green under a Common Law offence and not the Official Secrets Act if the national interest was being compromised?

The only explanation I have for why Sir Paul is using the “national security” argument is that it gives the police an excuse to continue their investigation. It also allows the government to continue to support the police investigation (and hide behind it).

Speaker: The police didn't have a warrant

The Speaker, Michael Martin, has just given a historic statement to the Commons, overshadowing the Queen's Speech in the process, about the raid on Damian Green's Common's office.

It was an amazing statement. In short, what we learned was that the Speaker did not know what was going on. The Serjeant at Arms did know but she did not know what she was doing. And the police overreached themselves.

The Speaker began by quoting Erskine May about Parliamentary Privilege and other rules about Parliament to claim that no MP was above the law and the police were allowed to go about their business. This chimes with what the Oxford University constitutional expert, Vernon Bogdanor, has said on the matter.

Michael Martin then went about setting out what he knew. He said the police had written to the Serjeant at Arms about a possible need to arrest and search an MPs Common's office. The Speaker emphasised the word "might" and said the identity of the MP was unknown at this point.

On the day of the arrest/raid, last Thursday, the Speaker was informed by the Serjeant at Arms that the search of an MP's office "might" take place. Again, note the "might."

Then, the Speaker told us, his very limited involvement ended. In astonishing revelations, the Speaker then revealed that the police entered Damian Green's Common's office without a warrant (despite using warrants to enter his homes and constituency office). Not only did the police not offer a warrant (because they didn't have one), they also did not tell her that she could refuse their entry consequently. Furthermore, the Commons Clerk (basically the chief exec of the Commons) and the Serjeant at Arms did not even ask for one. This really is extraordinary. It was the Serjeant who authorised the police's admission to Green's office and she did this by merely signing a consent form from the police. At no point did she consult the Speaker. He was only told about what had happened in the evening. The Speaker said he regretted no warrant was asked for and regretted the police were allowed to remove Green's computer which had details of his constituents on it.

Michael Martin then set out what he was doing next. 1) He is to set up a Committee of seven senior MPs (appointed by the Speaker). 2) He has granted a debate on Monday about the issue (though the government gets to set the terms of the debate motion). 3) He is to set out a protocol of future procedure. One key facet will be that warrants will always be required in any future search of an MPs office.

These measures are welcome though MPs raised concerns after the Speaker's statement in Points of Order about whether the debate on Monday will be curtailed by the government. Surely even this government wouldn't be that stupid?

What was disappointing, though perhaps predictable, was the response of some Labour MPs. Their hypocrisy was astounding. They are all sat behind a Prime Minister, who as Shadow Chancellor, made his career out of handling and publishing leaks. Labour just does not seem to get it. Of course, as a government, it is profoundly annoying that embarrassing information leaks from the civil service to your political opponents. But it is a fact of life in our democracy. An essential part. It should not lead to MPs being arrested. What we are talking about is simply embarrassing information which is in the public interest to be revealed. As Damian Green himself noted, it would be a disgrace if information that compromised Britain's national interest was being leaked. But that is not what we are dealing with here. Why else did the police arrest Green under a Common Law offence and not the Official Secrets Act. Labour MPs are being, quite frankly ridiculous, banging on about the independence of the civil service, the civil service code and how leaks compromise the effectiveness of departments. If they feel that strongly I would suggest Labour MPs elect themselves a new leader who has not been so compromised and tainted by handling leaks!

UPDATE: After the Speaker said he regretted no warrant was asked for in his statement, MPs then debated the Queen's Speech. But Conservative MPs in particular were keen to pick up on the Speaker's regret. They wanted the Prime Minister to admit that he too regretted the police had entered Green’s office without a warrant. Bizarrely, but predictably, the Prime Minister once again hid behind “operational independence of the police” to avoid expressing an opinion. The Prime Minister was asked multiple times and each time he refused to properly answer. The reason for this has to be because he is in full support of the leak inquiry and police investigation, despite being previously a significant beneficiary of leaks himself when in opposition. When Brown refuses to answer the direct questions to him he just makes himself look pathetic and increasingly a figure of ridicule. It is a huge character flaw of his.

All governments don't like leaks

Well, that is not strictly true. Governments like to leak themselves to drive the news agenda and to make their enemies - whether in opposition parties or within the party of government - look bad. But governments do hate leaks that go against them because leaks reveal embarrassing material, make them look not in control of events, and not in control of the news agenda.

Mandelson has told Sky News today: "I also have to say I think that for many Conservatives, it is a self-serving smokescreen, behind which to hide their own apparent collusion with a Home Office official who was allegedly systematically leaking Home Office papers to the Conservative Party, in order to pursue his own personal political ambition. I would like to know from the Conservatives whether their frontbench and their leader knowingly colluded with that civil servant in riding a coach and horses not only through the Civil Service code but also through the law."

Talk about a smokescreen of his own! Oppositions have to use leaks because of the secretive nature of British government. The Freedom of Information Act is no where near as open as in the United States and thus oppositions need to supplement the information they can acquire officially via FOI requests with leaks. Leaks can also prove far more timely as this government often fights the release of information under FOI. When the information finally does get revealed, its political significance is often diminished. Mandelson has taken the high and mighty approach talking about the Civil Service code but he will be acutely aware that Labour hugely benefited from leaks when opposition, and no politician more so than Gordon Brown.

Mandelson is therefore being disingenuous. This post is not intended to make an overtly party political point other than to highlight the Labour government's hypocrisy towards leaks. The point is that when in opposition a party will embrace leaks. When in government they will rail against them. The Conservatives, like Labour, will no doubt turn against government leaks when they return to government. They will try and stop them and no doubt will criticise them to. But hopefully the next Conservative government will not take leak inquiries to the extremes Labour has and seek the arrest of civil servants and MPs who have not violated the Official Secrets Act.

Damian Green controversy continues...

There have been quite a few new developments on the Damian Green affair since i last posted.

So what's happened...

• The Tories have said only four leaks were being investigated by the police. The police say they are looking at 20 possible leaks.
• We learned that it was Bob Quick, assistant commissioner special operations in the Metropolitan Police, who authorised the police raids though it is not known when the decision was taken and who else was involved in the decision making process.

• It was revealed that David Cameron, the Mayor of London, the Speaker of the House of Commons, the Serjeant at Arms, the Director of Public Prosecutions, and Sir David Normington, the Permanent Secretary of the Home Office were all told about the impending arrest. However, the government still claims that no minister had a clue the arrest of an MP was going to take place.
• Jacqui Smith, the Home Secretary, not content to claim that she did not know about the arrest of Green before it happened also claimed she not to know that a Tory MP was under investigation. This was then directly challenged by her Shadow, Dominic Grieve, who said she “knew very well” that an MP was being drawn into the investigation, but “just decided to sit back on her hands.”
• Dominic Grieve also rejected Smith’s claim that it was proper that ministers kept out of police investigations, saying that “all sense of proportion and common sense” had been lost. The police appeared to have been acting on “flimsy and trivial grounds,” he said.

• Gordon Brown and Jacqui Smith are still trying to distance themselves from the whole affair by hiding behind the "operational independence of the police."
• This though is "not good enough" for David Cameron who, writing in the News of the World, accused Gordon Brown of being a “hypocrite” for failing to condemn the police operation. This is because it is widely thought that Brown received and benefited from more civil service leaks than anyone else while the Tories were in power. Cameron wrote: "The question is, does he think it is right for an MP who has apparently done nothing to breach our national security to have his home and office searched by a dozen counter-terrorism police officers, his phone, Blackberry and computers confiscated, and to be arrested and held for nine hours?” Cameron added: “When it comes to vigorous opposition, if this approach had been in place in the 1990s, then Gordon Brown would have spent most of his time under arrest. He made his career from passing on Whitehall leaks. And he’ll be guilty of hypocrisy if he doesn’t speak out.” McCavity Brown trying to distance himself from controversy? I don't believe it!

• Harriet Harman departed somewhat from the government's script on the arrest by raising concerns about the search of an MPs Common's office by the police. She said: “I think the Speaker might well want to review the processes by which authorisation is given to search the Palace of Westminster. We have got to be sure that whilst MPs are not above the law, that they are able to get on with their job without unwarranted interference by the law. These are very, very big constitutional principles, we have to make sure they are protected.”
• But the constitutional expert, Vernon Bogdanor, has rejected the arguments of some that ‘parliamentary privilege’ protects MPs from having their Common's offices searched by the Police: “MPs are subject to criminal law as much as the rest of us. Their parliamentary privilege only extends to speeches in the chamber, not their offices.” Bogdanor said therefore the Speaker was within his rights to let the police to search Green’s office. He said: "The police followed the correct procedure in asking the Speaker, Michael Martin, if they could search Damian Green's office. Had the Speaker refused, he could have been accused of condoning suspected wrongdoing. An MP's office cannot be out of bounds for the police. Suppose that an MP had committed a theft and had hidden stolen goods in his office. Would it seriously be maintained that the police should not have a right to search that office?"
• The Speaker, Michael Martin, plans to respond to all the furore over his role by making a statement to MPs on Wednesday as soon after the State Opening of Parliament as possible.
• Iain Dale has posted about a leaked email (i kid you not) sent from Harriet Harman's office asking for a meeting to "discuss arrangements for the Queens (sic) Speech and considerations in advance of the Speakers (sic) statement on Police action and Parliament." Those invited were Jacqui Smith, Jack Straw, the Chief Whip, Cabinet Secretary Gus O'Donnell, Serjeant at Arms Jill Pay, Parliamentary Clerk Malcolm Jack, Tom Healey from the Cabinet Office, Brown's principal private secretary James Bowler, and a representative from the Speaker's Office. Dale said he was concerned that no representatives from the Conservatives or Liberal Democrats were invited. The clear worry is that the principal protagonists are meeting to get their story straight, arrive at a common position and influence what the Speaker says in his statement tomorrow - and of course you can't do that with Tories and Lib Dems present. Harman's office has responded denying any attempt to influence the statement or anything else untoward, claiming it is essentially a meeting about logistics and fitting everything around the Queen's Speech. As Dale says, it's beyond parody, isn't it?

• We have also learned that the House of Commons office of Damian Green is routinely swept for electronic bugging devices, along with other offices belonging to senior Conservatives, amid fears of covert monitoring. There are said to be "major concerns" at the highest levels of the Tory party over suspected monitoring by the authorities.

• MPs are threatening to disrupt the state opening of Parliament tomorrow in protest at the arrest of Shadow Minister Damian Green. Leading the charge is said to be former Home Secretary David Davis who has put himself at the head of preparations for a cross party protest. Davis said that he has been studying parliamentary procedure to find the most effective way of registering MPs’ anger. One option is to force a debate on the so-called sessional orders, he said, adding that any protest would take place after the Queen had delivered her opening address. He suggested that he was ideally suited to co-ordinate any cross-party action. “I don’t think that this is something that can come from the front bench."

• The identity of the whistle-blowing civil servant became known over the weekend to be Christopher Galley, a 26 year old assistant private secretary at the Home Office. He then broke cover on Monday flanked by his lawyer (who, incidentally, represented Lord Levy during the cash for honours scandal). Galley was revealed to be a former Conservative council election candidate who had first met Damian Green in the Houses of Parliament in 2006 and “regularly” supplied him with information for the next two years. Galley's lawyer said the leaked information was “important for the public to know in an open and democratic parliamentary system.” His lawyer also insisted the leaked documents were “embarrassment material” and important to holding the Government to account. “It’s really not state secret, national security, terrorism, financial jeopardy, loss, gain or otherwise — nothing remotely like that,” he said.
• Detectives disgustingly accused Damian Green of “grooming” the young civil servant during his questioning. A senior Conservative told the Times: “Damian was very angry at this clear attempt to provoke him and did not reply. As a party we want to make it clear that this was grossly inappropriate but symptomatic of the cack-handed way the police have conducted this investigation.” The accusation of “grooming” is incendiary because of its connotations with paedophilia. The word “grooming” means: "The act of attempting to gain the trust of a minor with the intention of having a sexual relationship with him or her." A much better word for the police to have used would have been “procuring.” The police arrested, though did not charge, Green under the Common Law offence of “suspicion of conspiring to commit misconduct in a public office and aiding and abetting, counselling or procuring misconduct in a public office." In other words, they believe that Green did not just passively get given the information which he subsequently leaked by actively sought the information, encouraging the civil servant to provide it.

• The Metropolitan Police's Acting Commissioner, Sir Paul Stephenson, has ordered, as of today, an investigation into his police force's own investigation of the Home Office leaks. Sir Paul said: "I am properly concerned about the issues being raised within the continuing debate surrounding the ongoing investigation into the leaking of government information." He added that there would be an "urgent review of our decisions, actions and handling of the investigation to date." He has appointed British Transport Police Chief Constable Ian Johnston to head up the inquiry and will report back to the Metropolitan Police in two weeks. It is the first clear sign that the Met realises that it has made a mistake with its leak investigation. Sir Paul has come under pressure and has had his judgement called into question. The Met has got involved in something that it ought to have seen was the equivalent of a political grenade and has managed to get every main political party and everyone in the media against them. Following on from its handling of the cash for honours investigations this is the last thing the Met needed. The Met should have told Sir David Normington when the Home Office Permanent Secretary made the complaint that leaks of non classified information were not a matter for a police inquiry. When approaching a bear trap, the sensible thing is to walk around it, not step on it! Nevertheless, this investigation into an investigation potentially gives the police a get out clause if it wants to draw the matter to a close. It would be humiliating for the police but bringing an end to its leak investigation would be the best course of action. The Met cannot afford to damage its reputation any more.
• The Times reported today that the police also want to question David Davis who used to be Damian Green's boss. However, they are wary of doing so because of raising the temperature, escalating the controversy further. Will the police never learn!!!

The arrest of Damian Green

Outrageous! It is unprecedented that an MP has been arrested for receiving and revealing leaked information, or "aiding and abetting misconduct in public office" as the police put it, and had his homes and offices searched. This is especially the case as none of the information leaked put, in any way, national intelligence, national security or international relations at risk.

Green has essentially been arrested for releasing information that is in the public interest but not in the government's interest. His arrest follows the arrest last week of a Home Office official who the police believe leaked the immigration information to Green.

It is also important to remember that it is a part of our democracy that civil servants leak information to opposition politicians which is in the public interest. And before anyone takes the high and mighty approach to leaks, the government uses leaks all the time. How else did we know about the fall in VAT and the increase in the top rate of tax before the Pre-Budget Report was announced? Government ministers leaked the information to help drive the news agenda. And what about Robert Peston, the BBC's economics editor, who has been the recipient of leaked information regarding the nationalisation of banks by the government? That information was not from wicked civil servants but from government ministers. Is the Metropolitan Police going to arrest him too?

There are many questions that need to be answered:

1) The Prime Minister claims that he knew nothing about this (a claim David Davis says he finds "extraordinary"), Labour HQ have released a statement that no minister had prior knowledge, and the Metropolitan Police have said in a statement that the arrest was made without any ministerial influence. "The decision to make today's arrest was taken solely by the MPS without any ministerial knowledge or approval." But even if the Prime Minister knew nothing, is it conceivable that the Home Secretary would not have been informed prior to an arrest of a Member of Parliament? If she did not know, why was she not informed?

2) Why did no minister know about the arrest prior to it taking place if David Cameron and Boris Johnson had both been informed? I agree with David Davis, the former shadow Home Secretary, it is "astonishing" that no one in senior government also knew.

3) If Jacqui Smith did know beforehand, however, why did she not call off the arrest? Could it have been because the Met's investigation into the alleged leak of confidential government material followed their receipt of a complaint from the Cabinet Office and thus she did not want to call off an investigation into a complaint the government had itself made? Also, was it not in the Home Secretary's interests to pursue this investigation which was, after all, an investigation about leaks emanating from her own department? There is clearly motive on Smith's part...

4) If the government was not involved or aware, what do they think of yesterday's arrest? Do they condemn it like the Conservatives and Liberal Democrats have? David Cameron has described it as "heavy handed;" David Davis said the arrest was somewhere between "an astonishing error of judgment" and "judicial intimidation;" and the Lib Dems have said Damian Green's arrest was a "worrying development" with serious implications for the balance of power between the government and parliament. Chris Huhne, the party's home affairs spokesman, has said: "Receiving information from government departments in the public interest and publicising it is a key part of any MP's role. It seems that either the law needs to be changed over the police have overstepped the mark." Does the government agree?

5) If the police did act alone the decision would have had to have come from the top. Is it a coincidence that the arrest came on the last day of Sir Ian Blair's tenure as Metropolitan Police Commissioner? It is highly plausible that as an act of revenge against the Tories who forced him out of his position early, New Labour's favourite policeman gave the all-clear for the arrest or even instigated the arrest of a senior Conservative frontbench MP.

6) Why on earth were counter-terrorism police and counter-terrorism powers used to arrest an MP over leaked government documents? This is not what the legislation was drafted for! The Counter-Terrorism legislation has been repeatedly abused by the police and needs to be re-drafted much more tightly. On the day of the terrorist attacks in Mumbai, India, this arrest did not place the police nor the government's legislation in a positive light.

7) Why did the police use such "heavy handed" tactics? Not only were nine counter-terrorism police officers used, they chose to arrest Damian Green rather than just question him; they chose to search his homes and offices - including his Commons office; and then held him for nine hours at a police station - only bothering to start questioning him after seven hours had passed. These are the tactics of intimidation which some have even described as "Stalinesque." David Davis has claimed that the move was designed to intimidate whistleblowers across Whitehall and it is difficult to disagree with him. He stated: "What we are seeing here is something designed to intimidate whistleblowers across Whitehall and actually to undermine the role of opposition doing its job, and doing its job properly in the public interest." Guido reckons it was a move to intimidate a Treasury mole who many believe exists and is passing information to George Osborne. Will Osborne be arrested now?

8) Finally, why did the Serjeant at Arms and the Speaker give the police the authority to search Damian Green's House of Commons office? Conservative MPs are said to be very unhappy with the Speaker and Iain Dale called the move "outrageous." Dale also highlighted the fact that the police had waited until the Commons was no longer sitting so that there would be no opposition from Tory MPs trying to bar their entry to Green's office.

Lots of questions lacking answers. Damian Green is safe, he was just doing his job and will continue to do so, but the whole incident does not place Labour or the police in a very good light. Expect this story to run...

UPDATE: So, David Cameron told the arrest before it happened. So did the Mayor of London. So did the Speaker of the House of Commons. So did Sir David Normington, the Permanent Secretary of the Home Office. But the Prime Minister, Home Secretary nor any other minister had a clue the arrest of an MP was going to take place and were thus kept in the dark by the police.

This account is seriously stretching credibility! Surely the Home Secretary knew? But if we are to take the government at its word (and you'll excuse the scepticism developed after 11 years of untruths) that ministers honestly did not know, then why the hell were they not told! Why did the police inform other politicians but no government ministers? Was it a conscious decision not to implicate the government as it would put ministers in a difficult position? By not telling them the police could go ahead and the government gets its leak investigation including Green's homes and offices searched.

Finally, why did Sir David not tell Jacqui Smith? Did Sir David, like the police, consciously choose not to implicate the Home Secretary so that the investigation could run its course? This can be the only explanation for the Home Secretary not knowing! Plausible deniability!

UPDATE 2: Damian Green was not the only politician who built his reputation by handling leaked government information. Gordon Brown was a past master of using leaks to make a government's life difficult. Check out Guido and an excellent dossier compiled by Danny Finkelstein. Are the counter-terrorism police about to come for Gordon and detain him for 9 hours? I think not somehow! Double standards!

The politics of “doing something”

Gordon Brown is repeatedly attacking the Tories as the “do nothing” party. The opposition is undoubtedly vulnerable to Brown’s jibe because he is portraying himself as the “do something” leader. On the face of it, surely “doing something” is better than “doing nothing”? However, I believe Cameron is showing signs of developing a strategy to neutralise Brown’s attacks. Cameron is saying that Brown’s “do something” is effectively a costly dud; it will not work, will only lead to higher, unnecessary taxes and all because Brown knows that he has to be seen to be “doing something” otherwise he is finished politically, even if his “something” is an expensive waste of time, a “fig leaf” in the words of Vince Cable.

So why has Brown adopted this strategy?

1) DIVIDING LINES - For Gordon Brown, politics is about dividing lines; it is how he operates. His most famous and successful dividing line used at consecutive general elections against the Conservatives was “Labour investment vs. Tory cuts.” The Prime Minister now wants the electorate to embrace his new dividing lines: “Labour action, strength and fairness vs. Tory inaction, dithering, and unfairness.” Brown believes this strategy will secure him victory at the next general election. For this is to work, he will need to call an election in 2009 rather than hang on until 2010. The PBR had all the hallmarks of an old-style pre-election giveaway Budget with: more money for pensioners; VAT tax cut in a pre-Christmas giveaway; softening the potential impact of planned changes to vehicle excise; and making permanent the pay-out for a majority of those who lost out from the abolition of the 10p tax rate (though still ignoring a million people who have yet to be ‘compensated’). In a year’s time Darling is unlikely to have any money left to hand out pre-election bribes. This will especially be the case if his (optimistic) growth forecasts need to be downgraded yet again as seems likely. Whether Brown can call an election in 2009 in the midst of a recession and after all his election shenanigans for party political advantage a year ago is a moot point. John Rentoul reckons Brown has made calling a 2009 election harder on Sunday's BBC1 Politics Show, when he ad libbed: "I am not planning it at all; I do not think people would think much of me." We shall see…

2) FEAR OF IMPOTENCE FROM A BIG STATE POLITICIAN - Another reason why Brown has adopted a “do something” strategy is that he is an instinctive big State politician who thinks that the State always offers the best solution. He will have felt compelled to act because of this and also because he would not have wanted to admit his own impotence. Brown could have prepared Britain better for an economic downturn. Over the last 11 years he could have taken steps to prevent Britain having the world’s biggest housing boom. Remember in his 1997 Budget Statement he promised: "I will not allow house prices to get out of control and put at risk the sustainability of the recovery." He could have taken steps to ensure that Britain did not have the highest levels of personal debt in the world. And he could have taken steps to balance the economy so that it was not overly dependent on housing, finance and government spending. But Brown chose to do none of these things and instead chose to preside over an unsustainable boom with the largest budget deficit in the developed world. As a result of not “fixing the roof when the sun was shining,” he has been forced to abandon his fiscal rules – the bedrock of his economic policy – and borrow vast sums of money, leading to a doubling of the national debt to over £1 trillion in just five years time. Faced with a large budget deficit and no money Brown is unwilling to admit he is impotent to act even though he admitted back in 1997 as Chancellor that: “We have learned from past mistakes... you cannot spend your way out of a recession.” But that was then and this is now. Now, Brown is Prime Minister and fighting for his political life. He is returning to type as the instinctive big State politician, believing that if he “does nothing,” admits he did not prepare for a downturn and as a consequence is impotent in the face of the recession, he will be duly punished by the electorate

3) HE ACTUALLY BELIEVES IT WILL WORK - A further reason – and the least cynical - why Brown has adopted his “do something” approach is that he genuinely believes his fiscal stimulus will work. It will not come as a surprise that I do not agree. I think the centrepiece of his stimulus – the cut in VAT – will not work as I cannot see how it will have a great effect on behaviour, or any effect, to that matter. Why will a 2.5 percent cut make any difference when shops are already offering substantial discounts of 20 percent or more? Furthermore, only about half of the 2.5 percent cut translates into an actual cut in consumer prices, according to economists, and this is even dependent on retailers passing on the cuts rather than pocketing themselves. I understand why the government chose VAT for a cut because it is immediate and is designed to encourage spending because to make savings you have to spend money as VAT is a tax on spending but I strongly believe, for the reasons outlined above, it will have only a marginal effect at best and definitely not worth the £12 billion the government is borrowing to pay for its temporary tax giveaway. Brown would have been better off raising the tax free allowance of income tax for low income workers or cutting the basic rate of income tax. This would benefit low income and middle income workers most and these are the type of people who are feeling the pinch and are unlikely to save their tax cut as they do not have that luxury. Brown has made a costly mistake which although passes the “do something” test, fails the “do something worthwhile” test.

The Conservatives criticise Brown’s fiscal stimulus because they argue, quoting the IMF, that Britain, with such a large budget deficit, should not be going down this route, as a stimulus package is only for those with surpluses or relatively small deficits. The Tories thus argue the government is being irresponsible – both in not building a surplus in the good years and for borrowing even more money to fund a fiscal stimulus now in the bad years. They also argue that economic history proves that governments cannot spend their way out of recession. It failed in the 1930s when FDR tried it in the United States (only working with a shift to a war economy) and it failed during the 1990s when Japan tried it during their “Lost Decade.” The Conservatives also argue that tax cuts should be funded (paid for by cuts in spending and thus responsible) and they should be permanent. Brown’s fiscal stimulus essentially lasts only 13 months and then comes to end followed by permanent tax increases which is the last thing the economy will need when it is trying to recover.

That is the critique from the Right, but one can also criticise Brown’s fiscal stimulus from the Left. Brown’s stimulus basically amounts to 1 percent of GDP, which is what the IFS said would be the bare minimum. The IMF has called for a stimulus of 2 percent of GDP which in Britain’s case would equate to about £30 billion. Moreover, in the United States, President-Elect Obama’s advisers have been talking about a stimulus in the region of 3.5 to 5 percent of US GDP. The critique from the Left is therefore that never mind whether Brown has chosen the right way to transmit his stimulus to the failing British economy, the real problem with Brown’s stimulus is that it simply is not large enough to do any good anyway. If this US stimulus comes to pass it will be a bold move by the new President because America’s budget deficit and public debt are also at similar levels, proportionally, to Britain’s. When one looks at the measures Brown has announced from the perspective of the Left, he has been far too cautious – and fudged his stimulus. Not large enough to do any good, but large enough to claim he is “doing something.” Gerard Baker in the Times (25 November) has given an explanation for why Brown has chosen not to “go for broke” like Obama. He wrote: “The answer is that Britain is much more vulnerable to further meltdown in the financial system. As bad as it is, the total size of the contingent liabilities of the US banking system is probably no more than 30 percent of US GDP. In Britain the number is probably between 200 and 300 percent. If a large chunk of that eventually has to be met by the Government, the scale of the fiscal crisis would be awful in America but literally catastrophic in Britain.” I would add another answer. Brown does not like being branded “irresponsible” by the Tories and accused of putting economic stability at risk. Had he gone for a fiscal stimulus of 2 percent of GDP or more he would have opened himself up further to the “irresponsible” charge and a larger “tax bombshell” to follow. In the consequences, Brown compromised and took the middle road between “doing nothing” and “doing something worthwhile” leaving him with the worst option of “doing something costly and ineffective.”

How the tax system works

Suppose that every day, ten men go out for beer and the bill for all ten comes to £100. If they paid their bill the way we pay our taxes, it would go something like this:

• The first four men (the poorest) would pay nothing.
• The fifth would pay £1.
• The sixth would pay £3.
• The seventh would pay £7.
• The eighth would pay £12.
• The ninth would pay £18.
• The tenth man (the richest) would pay £59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. 'Since you are all such good customers,' he said, 'I'm going to reduce the cost of your daily beer by £20.' Drinks for the ten now cost just £80.

The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the £20 windfall so that everyone would get his 'fair share?'

They realized that £20 divided by six is £3.33. But if they subtracted that from everyone's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

• The fifth man, like the first four, now paid nothing (100% savings).
• The sixth now paid £2 instead of £3 (33%savings).
• The seventh now pay £5 instead of £7 (28%savings).
• The eighth now paid £9 instead of £12 (25% savings).
• The ninth now paid £14 instead of £18 (22% savings).
• The tenth now paid £50 instead of £59 (16% savings).

Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

'I only got a pound out of the £20,' declared the sixth man. He pointed to the tenth man, 'but he got £10!'

'Yes, that's right,' exclaimed the fifth man. 'I only saved a pound, too. It's unfair that he got ten times more than I did'

'That's true!!' shouted the seventh man. 'Why should he get £10 back when I got only two? The wealthy get all the breaks'

'Wait a minute,' yelled the first four men in unison. 'We didn't get anything at all. The system exploits the poor'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill.

And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

Old Labour rises from the dead

In the 1992 general election, the Labour shadow cabinet ran on a platform of increased taxes on middle and higher-income earners – a decision which cost them the election after the Conservatives ran an effective ‘Labour’s tax bombshell’ campaign. After Labour’s 1992 general election defeat, Tony Blair and Gordon Brown took the decision that they must nullify forever voters’ fears that Labour would tax the rich wealth creators punitively. Never again would Labour only protect the poor to the detriment of the interests of middle and higher income earners and neither would it go into an election as a tax-raising party. The failure of the 1992 election led to the establishment of Blair as Labour leader and Brown as shadow Chancellor, and the two men set about making New Labour the party of ‘aspiration’. New Labour embraced wealth to such a degree it made its traditional supporters very uncomfortable. Peter Mandelson, one of New Labour's architects, memorably said that he was "intensely relaxed about people getting filthy rich." Tony Blair understood that by encouraging wealth creation he could enhance social justice as the former paid for the latter. It was one of the central tenets of the New Labour philosophy.

But after yesterday’s Pre-Budget Report, Darling effectively killed New Labour. He not only increased taxes on the wealthiest two percent of the country which was something New Labour had promised not to do (more of a symbolic move than a significant tax raising measure), he also raised national insurance tax by 0.5 percent from 2011 onwards (not that Darling was explicit about this in his speech and unsurprisingly was the only key measure not to leak out beforehand) – a move that will affect those earning just £19,000 or more a year (Labour disputes this but the IFS has confirmed it is true). Once again Labour will fight a general election with the promise of tax hikes not only on the wealthy but Middle England too. George Osborne called it “a tax on the jobs and incomes of Middle Britain.” The Tories also called it “the most socialist budget since Callaghan” and the BBC’s Economics Editor Robert Peston said this was the "first genuine socialist budget" from Labour since they returned to power in 1997. The IPPR also proclaimed Alistair Darling’s tax measures as “the most redistributive budget statement of the last 30 years.” This Robin Hood Budget has shown that Old Labour has risen once again from the dead, killing New Labour in the process. ‘Aspiration’ has been replaced with ‘redistribution’, or ‘fairness’ as Labour is spinning, as the party’s central message.[1]

The move has delighted Labour’s core voters and traditional supporters because Brown, an instinctive tax raiser, has boldly decided to jettison the strictures holding him back. Polly Toynbee was ecstatic exclaiming: “The New Labour era is over – welcome to social democracy!” and Labour MPs were also jubilant hailing what they called a “soak the rich” package. Changing course so drastically is much easier to do now. Not only is the country in recession which allows Brown to say “extraordinary times call for extraordinary actions,” his greatest restraint is no longer next to him – Tony Blair. When shadow Chancellor Brown favoured a 50p top rate on incomes over £100,000 in the run-up to the 1997 election, but the plan was vetoed by Blair. Once Chancellor, Brown decided increasing income tax on high earners was not worth the effort – until now. It is inconceivable that Blair would have sanctioned such a Budget, fearful of losing the Big Tent of the electorate that he had constructed so carefully over the years, delivering three massive general election victories in the process.

The Budget, therefore, has to be seen as an enormous U-turn from Brown; as big as they come. It is also a gigantic economic and political gamble. Brown is gambling that the economy recovers by the second half of next year; that the government can deliver a major clampdown on spending and huge efficiency savings; and that the electorate will support a significant rise in taxes targeted at the wealthy but which will hit those on middle incomes too. By abandoning New Labour, Brown is gambling that voters will stay with him. Has the public mood changed so much that it is once again willing to give Old Labour a go? Brown is gambling that it has and that people no longer remember or fear the 1970s.

If the gamble works, Brown will have hauled the political centre to the Left, destroying the Thatcherite politico-economic consensus/settlement. If it fails, Old Labour’s return will be short-lived and most likely killed forever. The ideological stakes could not be greater. Nobody can argue anymore that voters do not have a choice in elections.

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[1] To be fair, Brown has always pursued a redistributive policy. But rather than through an obvious tax on the wealthy, Brown pursued redistribution by “stealth," channelling money to those on lower incomes through his complex tax credits. And don't forget his tax of choice - national insurance - which he first increased in 2002, raising payments by 1 percent.

PMQs - Election battle lines harden

A general election may be 18 months away but already the battle lines are not only being drawn but hardened too. At PMQs today the PM gave a robust, overtly partisan performance, in full election mode it seemed.

At every opportunity Brown attacks Cameron and the Conservatives as the "do nothing leader of a do nothing party" and the Conservatives, for their part, hit back that Brown is an irresponsible leader who is burdening the country with unprecedented debt and will hit every worker with a "tax bombshell" after the general election.

Cameron began PMQs by trying to get the PM to admit that he considered a VAT tax increase planned for after the next general election (15 percent up to 18.5 percent). In this the Tory leader was only partially successful. Brown admitted that many proposals were considered but then went out of his way to try and nullify the charge that he secretly plans this increase but is hiding it from the British people. Cameron had hoped Brown would be shifty leaving the impression that he was planning a "VAT tax bombshell" but Brown strongly criticised the increases of VAT by previous Conservative governments and was successful, it must be said, in leaving the impression that he is strongly opposed to increasing VAT above 17.5 percent.

In response to one of Brown's numerous "do nothing" jibes Cameron sought to set out the help Conservatives have said they would offer individuals and small businesses. The problem Cameron has is that although they may help they are pretty small beer and Brown and Darling mocked the Tory leader as he listed his proposals. The Conservatives are vulnerable to Brown's "do nothing" charge. Brown loves reducing politics to dividing lines and his new one is Labour action vs. Tory inaction. When people are hurting in an economy he can point to his fiscal stimulus and say "look, I'm pumping £20 billion into the economy to help us get out of recession what's the other guy offering - nothing."

Cameron can, and has, pointed out that the recession is not just imported from America but has many components that have the stamp 'Made in Britain' on them and thus this is Brown's recession. Another tactic is to attack the stimulus itself which Cameron did well at PMQs. He not only said that it will lead to higher taxes for everyone just at the point when the economy is trying to recover but also attacked the effectiveness of the stimulus. Cameron said there was "nothing stimulating" about the Pre-Budget Report package when the 2.5 percent cut in VAT was already being outweighed by shops discounting by 20 percent or more. This is something that he needs to continue with to combat Brown's "do nothing" jibes. Essentially, Brown's fiscal stimulus is a costly dud. Brown is only doing this because he feels he has to be seen to be acting not because what he is doing will help. £20 billion is a lot of money just to rescue the Premiership of Gordon Brown, helping him bribe his way to an electoral victory through his ineffective tax giveaways that we will have to pay double to fund ultimately. Cameron is confident that the British people won't allow themselves to be bribed in this way.

The two leaders also squared off on the issue of public debt. Cameron argued that in five years time the national debt will be over £1 trillion and tried to get Brown to admit this was true. Brown was desperate not to give the Tories the weapon of TV footage of him admitting this explicitly so only said that the Treasury had "published the figures." Therefore it was a yes without saying yes. He also said that Treasury figures had also established that debt would rise to 58 percent of GDP over the next few years and said that this was still lower than other counties' national debt levels (though those other countries do not have the same off-balance sheet debt that the UK has). Cameron jumped on this figure saying it was the same percentage level as when former Labour Chancellor Lord Healey was forced to go to the IMF in the 1976 for a humiliating bailout. Brown hit back: "I'm sorry I have to give him an economic lesson every week" and reiterated his point that the Conservatives would do nothing. He also quoted Andrew Lansley stupidly writing on the Conservative blog the other day that "this recession can be good for us." Cameron said the government had the "debt levels of Italy and the accounting practices of Enron." Cameron finished saying: "The country's going bankrupt, he's been found out, and New Labour's dead." Brown retorted that he was providing "real help to real people" and called Cameron the "do nothing leader of the do nothing party" once more for good measure.

Lib Dem leader Nick Clegg decided to lead on 'fairness' as this was the message Labour had been spinning about the PBR. Indeed, Clegg said 'fairness' had been mentioned 8 times in Darling's PBR. Clegg wanted to know that if the PBR was really so 'fair' why had Brown increased national insurance so that it will hit millions of middle-income workers. Clegg said the PM had had the chance to make a difference but chose not to. The Lib Dem leader wanted to know why Brown had wasted his chance? Brown replied saying the government had raised child credit, pension credit and the minimum wage.

Clegg said he wanted an answer not a list and said the Prime Minister offered only bluster rather than a response to the question. Clegg said Brown could have given big fair tax cuts if only he would close the tax loopholes that the wealthy exploit such as capital gains for millionaires. The Lib Dem leader accused Brown of toying with the hopes of the British people and asked why he had let them down? Brown said the government had given real change to families. He had raised the state pension and his cut in VAT will benefit low income families. And with bare faced cheek, Brown finished with: "We are the party of fairness. A party calling for £20 billion of cuts in services is not a party of fairness." Clegg just shook his head - how many times is Brown going to distort Lib Dem economic policy?

VERDICT

Brown was on good form today and although Cameron and Clegg asked good questions they struggled to land punches on Brown who was in a combative mood swinging his "great clunking fist." Many of the points the PM made wouldn't stand up against 10 seconds scrutiny (some are just outright lies) but with sheer outrageous bravado and an ability to avoid answering questions and not concern himself with facts, he edged this contest.

Brown - 8/10

Cameron - 7/10

Clegg - 7/10

PBR - Labour is a busted flush

Alistair Darling stood up for about an hour and gave his standard, rhetorically dry performance outlining where he was going to spend his £20 billion-worth of unfunded tax cuts and also set out his widely optimistic growth forecasts. It was a dull hour in which the Chancellor attempted to give a little bit of help to everyone while hiding the true cost. But even the much trumpeted 'fiscal stimulus' seemed to underwhelm. Was that it?

Darling sat down and then George Osborne stood up and the fireworks began. He gave Darling and Gordon Brown both barrels in what was a tour de force performance, roared on by the Conservative benches who were as loud as the Labour benches were quiet. (Incidentally, the Labour benches only really game to life during the overtly socialist sections of Darling's speech - such as the increase in income tax on high earners - nothing gets Labour going like the politics of envy!)

Osborne went on the attack branding Brown's claim to have abolished 'boom and bust' the height of hubris. He then revealed a truly staggering statistic. Darling had kept quiet but the Chancellor was doubling the national debt to £1 trillion! Yes! £1,000,000,000,000!!! The Labour government plans to borrow more than at any other time in Britain's history. Britain's debt levels will even be greater than when the last Labour government had to go cap in hand to the IMF for a bailout in 1976. Another excellent line from Osborne was that Darling's £20 billion-worth of tax cuts will be paid for by £40 million-worth of tax rises. Message to Darling and Brown - you can keep your tax cuts!

Osborne also noted that the tax rises are scheduled to come into force in 2011. He said this was conveniently after the next general election. Osborne said: "This budget is all about the political cycle, not the economic cycle!" It is very clear that Brown’s goal is to secure a fourth term and if that means throwing the kitchen sink at the economy to achieve it then so be it – to hell with the cost!

What is even worse about the tax rises being planned is that more will have to follow. The Chancellor's growth forecasts are widely optimistic. And as the BBC's Robert Peston pointed out, the government's record on economic forecasts has been "lamentable" in recent years. What this means is that the government will have even greater shortfalls and an ever bigger black hole requiring yet more borrowing and further tax rises. This will place an ever greater burden on current and future generations as we all pay for Labour's folly.

As for the centre piece of the so-called "economic stimulus" - the cut in VAT - Osborne was rightly scathing. The tax cut is only temporary, retailers may just pocket the 2.5% cut, and how is such a small cut going to boost spending when shops are already offering discounts of 20, 30 and 40 percent? It may be costing a whopping £12 billion but is unlikely to have the desired effect. If you are thinking about buying a £500 LCD TV, will a saving of £12.50 really convince you to make the purchase rather than delaying? Of course not. Sure, it has the benefit of being effective immediately and is directly related to purchasing (and thus cannot be hoarded and saved by the electorate) but I just can't see it having a big financial effect. Supporters of the measure say never mind, it could help with confidence in the economy. But £12 billion is an awful lot of money to spend on the off chance that it will inject some confidence into the economy with no guarantees. Moreover, as Osborne himself pointed out, both France and Germany have looked at a VAT cut themselves but have rejected it.

At the end of Osborne's reply to Darling, he asked the Chancellor to admit that our debt will rocket to an enormous £1 trillion. Darling refused to confirm. I have never seen the normally unflappable Darling look so flustered as he did when he stood up to give his reply to Osborne. He was really struggling as the Tories shouted "answer!" at him. The Tory MPs were remonstrating with the Speaker that Darling was out of order for not answering the simple questions Osborne had put to him. Clearly rattled, Darling sat down after the briefest of replies.

This Pre-Budget Report has shown Labour to be a busted flush. Labour failed to fix the roof when the sun was shining so can only offer a stimulus of 1% of GDP and this has to be funded by even more borrowing which is the height of irresponsibility given our ever growing deficit. The experience of Japan in the 1990s has shown us that governments cannot borrow and spend their way out of a recession. This was something Brown once admitted but he is no longer letting economic reality get in his way. This failed Prime Minister is gambling our country's future just to get one more term in office.

As Robert Peston said, this was the "first genuine socialist budget" from Labour since they returned to power in 1997. It also signals the death knell of New Labour and should signal the death of the government and Gordon Brown’s political career.

Unfortuntely we will all pay for Labour and Gordon Brown's failure! We better get used to the idea of higher taxes. They will be with us soon enough!!!

Is Yvette Cooper modelling herself on Luke Skywalker?

YVETTE SKYWALKER?

(A bit of a bitchy post this, but...) what is it with Yvette Cooper's hairstyle, if you can call it that? Whenever I see her on TV it looks an utter mess and is simply an ill-judged 1980s, boyish, Luke Skywalker haircut!

Come on Ed Balls! Sort your wife's hair out mate, it's a shocker!

Should Brown go to the polls 'early' in 2009?

Will Gordon Brown call an ‘early’ general election in June 2009 (the same day as the European elections)?

I say 'early' but 2009 is when the election would ordinarily have taken place. The conventional view has been that Brown will call a general election in May or June 2010, waiting until the last minute. However, people have started to suggest that 2009 could now be on the cards as the Tory opinion poll lead has narrowed and Brown has got himself back in the game, aided and abetted by a pliant media all too willing to welcome back the 'Comeback King' and 'Saviour of the World', although it must be said that Labour is playing down such a suggestion, in public at any rate, mindful of the difficulties they experienced last year when a general election was discussed.

Why go for 2009?

1. The effects of the recession on the real economy are only just starting to be felt. By going to the polls in spring 2009, the effects of the recession may not be as bad as in 2010.
2. Moreover, the IMF and the European Commission have both predicted that Britain will suffer one of the worst recessions out of developed world economies and the CBI has predicted a deep recession. By 2010, the UK could still be in recession or, even if the first shoots of growth were being seen, the economy would not have picked up sufficiently to help Brown electorally.
3. Furthermore, Andrew Rawnsley and Robert Winnett have both argued that the Conservative strategy is based on playing a long-game over 18 months until 2010. Winnett wrote: “The Tories are betting everything on a 2010 election,” and added: “With big quick tax and interest rate cuts on the way, 2009 will be looking increasingly attractive for Brown. He won't be able to pull the same trick next year and the eye of the recession may be the best time for Labour to go to the polls. By 2010 they may be long forgotten and any recovery will be in the very early stages... The Conservatives will be hoping that Brown doesn't have the nerve to go early." Nevertheless, I would argue that the Conservative strategy is not as rigidly based on 2010 as Rawnsley and Winnett have argued. I'm sure this is their preference but their strategy could still be applied to 2009. By then they could have offered their own significant funded tax cuts and still use the “higher taxes under Labour” message in an election campaign. Moreover, by spring 2009 the tax giveaways from Brown may not have come through in time to be felt and therefore it would be too early to decide whether Brown was indeed the saviour he claims he is - though this does perhaps bolster his claim to see the job through.
4. An early poll could play into Brown’s hands because he could ask the British people to give him a mandate to steer the country out of recession using all his experience he gained as Chancellor for 10 years. On this, he has the opinion polls on his side. Polls are still showing that there is a contrast between people’s preferences now and in the longer term future. In the latest Populus poll for the Times (11 November), Gordon Brown has a large lead over David Cameron as the “right leader to deal with Britain’s economy in a recession” (52 percent to 32 percent). However, David Cameron beats Brown when people are asked who is “better able to lead Britain forward after the next general election” (42 percent to 35 percent).

These are persuasive arguments. If I were Gordon Brown I would go to the polls in 2009.

The Conservatives are confident they would win in 2010 because of a public appetite for change and this desire if anything is likely to be stronger in 18 months time after the electorate has really been able to experience the affect of the recession hitting the real economy with higher unemployment and falling house prices. The race will also be tighter in 2009 because by 2010 it is likely that Brown would be a busted flush.

That said, the final decision may all come down to the opinion polls. Oh my God, what am i saying? Brown does not look at polls! Polls in no way whatsoever sway his decisions on whether to call an election early or not! Back to the real world... Margaret Thatcher used to want at least a five percent lead in the polls before calling a general election. Despite all Brown's positive coverage for handling the banking crisis, Labour are still anything from 3 to 11 percent behind in the polls and the Tories are holding steady at just above 40 percent. Most of Labour’s ‘recovery’ has been at the expense of the Lib Dems and ‘others’. In addition, the polls that give the Lib Dems higher support also show a larger Tory lead over Labour. I would contend that these polls showing a larger Tory lead are the more accurate polls as, historically, the polls which show lower Labour support are more accurate. Moreover, polls tend to underestimate Lib Dem support because they are starved of media coverage which is not the case during a general election campaign. Whatever the reality, Brown would nevertheless prefer a sustained lead in the polls prior to going ‘early’ in 2009. He is a cautious man so if he does not have an election lead by say April 2009, 2010 would then still seem the more likely option. However, Brown has been bolder of late and may decide if the polls are tight he can build an election winning lead during the election campaign. A risky move but he may be advised that last year he was too cautious and paid the price so next year he should be bold to win Labour a fourth term in office.

We shall see. But I agree with James Forsyth on the Spectator's Coffee House blog that the Tories need to make 2009 as difficult as possible by talking about it lots so that Brown has to shut down the speculation and kick the election into the long grass of 2010 because he cannot afford another bout of election speculation that damaged him so badly last year when he looked like he was trying to cash in on his popularity, putting his interest above national interest.

PMQs - Economy back on centre stage

This week's PMQs was a much calmer affair than the overly heated and disgraceful scenes of last week. Baby P was brought up again but only briefly and in a much more consensual way. The Labour benches went quiet unsurprisingly when Baby P was being discussed.

David Cameron used his first three questions to ask practical questions about what the government was doing to help small businesses get access to credit. He said that the Tories had supported the government's recapitalisation of the banks but that it was clear that the steps the government had taken were not having the desired effect. The PM said that the government was doing all it could to encourage banks to lend more but Cameron said the government should do more. Brown responded by claiming that a fiscal expansion was needed but the Tories were opposed. Up to this point PMQs was a pretty dull affair. Important issues but not much light generated - no change there then - and no heat given the subdued mood.

The proceedings picked up a little once Cameron moved on to the issue of taxation but still the two leaders were not firing on all cylinders. There was a little more heat between them but no more light. Cameron began by saying he knew how desperate Brown was to go on his borrowing binge (scheduled to be announced in the Pre-Budget Report on Monday), but everyone wanted to know how he was going to pay for it? He asked the PM whether taxes would have to rise as the Chancellor, Tony McNulty and Lord Mandelson have said? Of course Brown did not answer the question. Brown said we will need a fiscal expansion for small businesses to bring back growth into economy. He accused Cameron of calling for fiscal measures that would need a fiscal stimulus to pay for them - which the Conservatives opposed. Brown then called the Tories the 'do nothing' party.

Cameron scoffed that it was amazing that a former Chancellor could have forgotten the difference between fiscal and monetary policy. He asked again: how would the PM pay for his tax cuts and public spending? At this Labour MPs were shouting "Cuts" at Cameron and making scissor movements with their fingers. Brown stirred at this point. "Oh yes, oh yes, oh yes ... let me tell him about the difference between monetary and fiscal policy!" Brown said Cameron was only advocating the use of monetary policy to help people through the recession but that everyone around world was saying monetary action was not enough. He said only the government was offering real help and accused Cameron of being a 'lightweight'.

Cameron responded by quoting Derek Scott - Tony Blair's former economics adviser - which invoked a reaction from the Brownites on the Labour benches as Scott is a well known critic of Brown's. When Scott was asked whether it was true, as the government claims, that this recession was largely not of their making, he said "that is largely drivel." Cameron then moved on to words the PM might be familiar with, quoting Brown himself who had previously said: "Unfunded tax promises simply do not add up. They mean tax cuts before an election leading to tax rises after an election." That is what he said as Chancellor a few years ago, Cameron said. And in a good line, the Tory leader said: "If he doesn't agree with his Chancellor or Business Secretary, does he at least agree with himself?" Brown then said only a few days ago the Leader of the Opposition had said borrowing had to be allowed to happen, but then changed his mind. This was another blatant distortion by Brown who knows very well that Cameron was talking about automatic stabilisers. Nevertheless, Brown pressed on saying the choice for his government was whether to help people during difficult times or to do nothing like the Tories in the 80s and 90s. He finished by claiming that he would act while the Tories would refuse to act.

It was clear from the exchange that Brown wants to frame the debate about steps the government is taking to help people now while Cameron wants to talk about the future consequences of those actions. If Cameron can outline significant FUNDED tax cuts he should be in a much stronger position against Brown though of course will have to defend his flank against Labour charges that the Tories will be taking a slash and burn approach to the funding of the public services. What was also clear from the exchange is that unlike members of his Cabinet, Brown is refusing to engage on the question of how he is to pay for his increased borrowing and spending. Maybe all will be revealed in the PBR on Monday, but tax rises look inevitable. The Tories will continue to make this an issue and the longer Brown refuses to acknowledge the truth, the more evasive, shifty and dishonest he will look.

As for the exchange between Nick Clegg and Brown, the Lib Dem leader said he supported the bank bailout plan as he was told there were strings attached to banks. But what concrete evidence did the PM have to show it was working? Brown outlined the steps he had taken and was taking such as expanding liquidity to prevent banks collapsing through recapitalisation, getting funding for small businesses, and meeting with banks and building societies regularly to see what the problem was. Brown said that if it was necessary to take further measures these would cost money and he hoped he would get Clegg's support. This suggested to me that these "further measures" may be included in the PBR.

Clegg attacked what he said was a "complacent reaction" from Brown. He said the PM struts about on world stage telling other countries to follow his plan but his own plan was not working here. He said he bet the banks could not believe their luck that they had been bailed out yet were able to take their bonuses while avoiding lending to businesses. Clegg asked if Brown was too weak to get tough on the banks will he consider lending money directly to small businesses instead? Brown said it was untrue that banks were giving their directors bonuses. He said that every country in world was having the same problem with bank lending. He admitted that banks did have an adversity to lending, and said that this had to be changed.

VERDICT

Draw all round. Quite a subdued affair as a consequence of last week. Not much heat and even less light produced.

Has Brown made a fundamental error?

For years Brown has favoured raising taxes (indirectly and by stealth, it must be said) and using the money raised to fund public spending (what Brown preferred to call 'investment').

But recently, given the economic crisis and recession, Brown has positively endorsed a tax cutting agenda - which he calls a 'fiscal stimulus' (Brown has to use euphemisms you see).

This is a huge strategic error by Brown. He has not only allowed tax cuts on to the agenda, but worse still, for him and Labour, he has abandoned his previous position of a responsible, prudent steward of the economy who would put economic stability above all else, by embracing UNFUNDED tax cuts. This has played into the Conservatives' hands. It has given the Tories the confidence to abandon their pledge to match Labour's spending totals which in turn frees them up to offer FUNDED, responsible, and prudent tax cuts.

And as Fraser Nelson has pointed out, far from abandoning people as Labour alleges with its misrepresentation of Conservative policy, the Tories will be helping people by allowing them to keep more of their own money - and all in a way that doesn't weaken the economy and lead to higher taxes down the line which would be necessary to pay for Labour's irresponsible and reckless government borrowing.

But why did Brown suddenly embrace tax cuts a couple of weeks ago, and UNFUNDED tax cuts at that? Remember, this is the man who said: "No political party will be trusted if it promises stability in one breath and unfunded tax cuts in the next,” and who also pledged: "to make unfunded promises, to play fast and loose with stability... is... something I will never do and the British people will not accept.”

He could have embraced a tax cutting agenda because he saw other world leaders doing it. It could have been because sections of the media were calling for them. It could even have been that Brown realised that a 'fiscal stimulus' based purely on increased public spending would not work.

But I don't believe any of the above is true. Based on past behaviour, the most credible explanation is that Brown has made a religious conversion to tax cuts because he took a political calculation that Cameron and Osborne had seemingly boxed themselves into a corner by branding themselves as being fiscally responsible while pledging to stick to Labour's spending totals out of fear that Brown would attack any spending cuts (real or imagined). He thought that he could split the Tories by offering tax cuts while Cameron and Osborne were left in disarray as the Tory right turned on them.

But Cameron and Osborne are scared no more and have abandoned their pledge to stick to Labour's spending totals. Brown has come unstuck once again by playing political games. He has underestimated Cameron, offered unfunded tax cuts and by doing so has abandoned any claim he could have had to be the champion of economic stability.

This is a fatal error by Brown and he deserves everything that will come to him!!!