Public expenditure: old row, new realities

The wrong type of rancour had derailed Westminster for over a week, but at noon on Wednesday the prime minister announced normal service was being resumed. He put the plotting behind him and trotted out his favourite refrain: the choice facing the country, he said, was between Labour investment and Tory cuts. That slogan has carried the day in three straight elections. Gordon Brown was prompted to return to it after Conservative frontbencher Andrew Lansley brushed aside the charge that he would slash the NHS by promising to wield the axe elsewhere - revealing all other departments are in line for 10% cuts. A rapid retraction followed, but that did not stop Mr Brown pouncing on Tory savagery, which he contrasted with his own plan for £137bn in extra expenditure.

So far, so familiar. But beneath the well-worn rhetoric is a distinct twist in the facts: the cuts Mr Lansley mentioned are not a secret Tory blueprint, but are implicit in the government's own red book. The prime minister gave the opposite impression only by relying on funny figures, which ignore inflation. The budget provided for a small cut in total real spending in the three years from 2011; factor in unavoidable bills for lengthening dole queues and servicing the burgeoning national debt, and the cuts for public services become considerably bigger; protect the NHS, as Mr Lansley proposes, and cuts to everything else - from schools to social services - on something close to the scale he suggests, follow as a matter of arithmetic.

The arithmetic, however, can be made to add up in very different ways, so there should still be scope for a vigorous debate between the parties - over what gets cut, and indeed what taxes are jacked up. The trouble is neither side wants to have this debate. Having spent nearly four years weaving a cheerful new brand of Conservativism, David Cameron is extremely anxious about his handiwork being dismissed as a cover for old-fashioned cuts - which is why Mr Lansley was forced to wash out his mouth. Labour, meanwhile, has its own powerful reasons for joining the conspiracy of silence. A rocked government fears it would descend into an outright identity crisis if it called time on the public expenditure party - because improving the resources for schools and hospitals has, up until now, been its defining mission.

The party should, however, steel its nerve in the light of better economic news - one respected thinktank announced this week that the worst of the recession is over. The prospective recovery earns Labour credit, confirming it was right to prescribe stiff economic medicine, and that the Conservatives were wrong to carp. Immediate belt-tightening before the election could deepen the slump again - the political and economic cycles are fortuitously aligned. But at the same time, the passing of the emergency makes it unsustainable to postpone all discussion of rebalancing the books.

The government understands that hard-pressed voters will not take kindly to promises of swingeing tax hikes after the election. But most of the black hole is due to falling revenues, so it is proper to close most of it by increasing them. By stressing the protection of social services, Labour can still strike a contrast with the Conservatives, who remain committed to cutting the levy on inheritance for double millionaires. As in 1997 - despite the Labour denials back then - the public will presume the left-leaning party will tax more and spend more, and the public will be right. But the books are now in such a state that either party will have to tax somewhat more, and neither will be able to rely on this strategy alone: serious cuts will be needed as well. The government should start by axing Trident, but may also need to look again at student finance and benefits paid to the comfortably off. By getting on the front foot on expenditure, they could force the opposition to speak more often with the admirable candour that Mr Lansley has shown.