The economy-What the papers are saying and the end of fiscal prudence

The media is alive with economic gloom today.But if you want a view of the situation read Will Hutton in the Observer.

Hutton talking about new Labour's economic policy

For 10 years it worked, but now the game is up. The correct economic policy framework now comes unambiguously from liberal-left thinking - paradoxically more pro-business than free-market conservatism because it promises to keep order books full and business confidence high. Reviewing the fiscal rules is only a first step. Public spending and borrowing will have to rise to mitigate the downturn. Afterwards taxes will have to rise. The City in general - and the mortgage market in particular - needs immediate and wholesale reform. Nor should Britain pin its future on financial services - every part of the economy, from hi-tech manufacturing to the creative industries, needs support.

Most tellingly for Gordon Brown,he continues

Brown cannot successfully lead these necessary changes because he is indelibly associated with what has failed

In the same paper,Andrew Rawnsley relates a tale from the Treasury

On one especially nerve-jangling day in Great George Street, Alistair Darling came into his office early one morning to be greeted by a deputation of anxious officials. 'How bad is it?' asked the Chancellor. 'Pretty bad,' responded John Kingman, one of his most senior civil servants. 'We're not standing on the window ledge, but we're keeping the window open just in case.'

Over at the Independent its leading article says that the about tun on fiscal policy may well herald the end of the prudence that made the party electable.

If the rules are now to be changed, that is another way of saying that the old rules, the rules introduced to show how responsible a Labour government could be, would otherwise be flouted. If, as it appears, the changes will loosen restrictions on borrowing, then the reputation for sound money that Mr Brown built as chancellor is compromised. Such a move would also amount to an admission that the state of the economy is as bad, if not worse, than feared.

The Times meanwhile says that

The changes the Government is making to its fiscal framework are the result of its own laxity and incompetence.

adding that

The fiscal rules as they stand certainly can't be adhered to any more, but this is directly attributable to the way that the Government has treated them. The Government has lavished money on the public sector. And having specified the rules in the first place, the Government has behaved increasingly as if they did not exist. Unlike the successful reform of monetary policy, decisions on fiscal policy have been bound up with politics.