Now the hard questions begin ...
The government has been forced by the Lords to to detain terrorist suspects without charge for up to 42 days. Given the political capital Gordon Brown has invested in this proposal, such a setback would normally be of great importance in general, and very bad news for the PM in particular. But not in the middle of the financial crisis, with Mr Brown posing as saviour of the nation (and Europe and, tomorrow, the world!) and self-styling himself as a cross between Winston Churchill and FDR (helpful note to PM: be careful not to overreach for it inevitably results in hubris followed by a fall -- just ask Sir Fred Goodwin).
So the loss of 42 days has not made much of an impact on the public, though most had come to dislike it, and even in the Westminster Village it is only of passing interest when banks are being nationalised and recession looms.
As the dust settles on Momentous Monday (see yesterday's blog) the largely favourable reviews are being replaced with questions. Why, for example, is the government insisting that, as a price of the bail out, banks continue to lend to house buyers and small businesses at 2007 levels? You can understand why the government doesn't want the supply of credit to such targets to dry up -- which would turn an inevitable slowdown into a long and deep recession -- but 2007 was the height of the boom, when banks lent almost £120 billion in mortgages and business loans. To set the bar at that level surely risks yet another credit binge and a further fall just down the road.
Also, where will the government get the billions to prop up the banking system. Borrowing is the simple answer, but the likely consequences are anything but simple. The PM said yesterday that Britain was able to borrow freely because we enjoy "relatively low national debt because of the steps we have taken since 1997, where we wiped off perhaps more than around £100 billion of debt by reducing the proportion of debt in our national income."
I fear that is just factually untrue. According to the net debt when Blair-Brown came to power in May 1997 was £351 billion; in August of this year it was £632 billion in August (£545bn if you exclude Northern Rock, which the ONS says you can't), an increase of almost £300 billion rather than a £100 billion wipe out.
Even as a share of national wealth (GDP), things have not got better. In 1997, as the economy was entering a long period of growth, debt was 43% of national income (and falling). Today, after 11 years of growth, it is still 43% of national income (and rising -- even before the banking crisis). No wonder many economists think that, far from starting a new borrowing binge from a low level of debt, as the PM maintains, we are actually doing so from a rather high level.
Just how high it goes remains to be seen. Even before the bank bailout City economists were predicting that borrowing could be close to £100 billion in financial year 2009/10. The Institute of Fiscal Studies thinks borrowing will end up over 50% of GDP (that could be an underestimate) and could soon exceed an incredible £700 billion. The last time we borrowed proportionately that amount (the mid-Seventies), we had to be bailed out by the International Monetary Fund.
As the Ö÷²¥´óÐã's Business Editor writes this morning on his must-read blog, such levels of debt and contingent liabilities in Britain (and America and the Eurozone) "will probably dampen growth for years in the whole of the developed West, as governments may feel financially constrained from spending and investing on other services and projects, and the banks themselves are likely to devote all their spare resources to repaying their debts to taxpayers, rather than financing proper wealth creators."
We'll be speaking to an independent expert this morning to gauge just how deeply in debt the country is heading and we hope to have a Conservative perspective as well (is it really that different from the government's?). We also review the fallout from the ditching of the 42 days (and investigate the emergency legislation ministers still plan to keep up their sleeves).
The design critic Stephen Bayley will be here, along with former Cabinet Minister Clare Short, to discuss whether style or substance is most important in politics. And a new TV series is being launched which will see 10 teenage political wannabees put through their paces - culminating in a PMQs style debate in the House of Commons. We'll be catching up with two of the contestants, and the head judge of 'Election', Jonathan Dimbleby.
All that on the Daily Politics on Ö÷²¥´óÐã2 today at Noon.
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