Gordon Brown has taken the gamble of his life with a spending package which will see the government plunged into debt, and major tax increases in three years.
His hope is before that happens, he will have held and won a General Election – in which he will be hailed as the man who saved the economy.
In the short term, taxes will fall as VAT is cut by 2.5 per cent, to 15 per cent.
The aim is to get people spending, so money moves around the economy and growth returns as quickly as possible.
But the cut is only temporary, covering December 2008 and the whole of 2009. After that, VAT goes back up.
And in 2011 comes the hangover.
First, national insurance is to increase by half a per cent. This will be offset by an increase in the starting point for NI, so people on relatively low incomes will not lose out.
But anyone earning more than £40,000 will be paying more, raising an extra £500million for the Treasury.
It’s not just the exceedingly wealthy who will be hit by higher taxes, in other words.
But there will also, as predicted by the weekend papers, be a new 45 per cent tax rate aimed at those earning £150,000.
Further changes to income tax will mean anyone earning more than £100,000 also faces higher bills. In fact, the two per cent of the population with incomes above £100,000 will be paying an extra £3billion a year between them.
Finally, duty on cigarettes and alcohol is set to rise significantly – raising an extra £500 million annually for the Treasury.
People on average incomes are fairly well protected from the changes, assuming they don’t drink or smoke too much. But it’s still not a recipe for widespread popularity.
And remember, the tax cuts we are about to receive are temporary. The increases around the corner are permanent.
So what is Mr Brown playing at? Between 2009 (when taxes fall) and 2011 (when they increase) comes 2010 – when we probably have a General Election.
It may seem a cynical thing to point out. But Alistair Darling, the chancellor, could hardly have made it clearer that his statement to the Commons was about party politics as much as it was about economics.
He told MPs: “You can choose to walk away, let the recession take its course, adopting a sink or swim attitude, letting families go to the wall. This is no action plan.”
He was, of course, talking about the Conservatives, who Labour accuses of wanting to “do nothing”.
The phrase “let the recession take its course” was coined by unfortunate Warwickshire MP John Maples (Con Stratford), who used it in the Commons last week. Labour won’t let him forget it.
And when the recession comes to an end, Labour intends to take the credit.
As Mr Darling told MPs: “I am forecasting that output will continue to fall in the UK for the first two quarters of next year.
“But then, because of decisions taken in this Pre-Budget Report, I expect it to start to recover.”
So, this is the official narrative. Recession strikes, Labour takes action to set things right against the advice of the Conservatives, and is proved triumphantly right.
Mr Darling and the Prime Minister had better hope the economy does recover, as the only way to afford the tax cuts is to borrow cash – with Britain borrowing £118billion in 2009-10.
And if the nation is still struggling when those tax rises kick in, they could stop the recovery in its tracks.
George Osborne, the shadow chancellor, insisted cutting VAT would do little to help the economy, when it was his turn to set out the Conservative line to MPs.
Shops are already slashing prices – not by 2.5 per cent but by 20 or 30 per cent, he claimed.
Just three months ago, it was taken for granted that the Conservatives were on course for a landslide election victory, with Mr Brown going down in history as one of Britain’s least successful Prime Ministers.
But Labour’s recent comeback in the opinion polls, with the Tory lead cut to three per cent in some surveys, suggests that voters have been impressed by his response to the economic crisis.
The Pre Budget Report coincided with the publication of a new opinion poll by ComRes, commissioned by the BBC, which found the Conservatives are struggling to get their message across.
It revealed 53 per cent of Midlands voters believe Britain is “well placed to weather the economic downturn”, compared to 42 per cent who disagreed.
While nobody could deny that the downturn is a global phenomenon, the Conservatives have done their best to convince voters that Britain is experiencing more pain than it needs to – because Labour saddled the nation with excessive debt even when the outlook was sunny.
Although a significant minority of voters seem to agree, they are a minority. Most of us think the recession is not Labour’s fault.
It seems that Gordon Brown has avoided being blamed for starting the recession. He now hopes to get credit for ending it.