Guido looks at the economy and sees real trouble ahead, it needs decisive action, not hand-wringing words from politicians about tax simplification. The property market is seized up and consumer confidence is draining away. A massive pro-growth tax package is required now, the earlier the better.

George Bush is pushing a bi-partisan growth package targeting $150 billion in tax relief at individuals and businesses to kick-start private sector spending. That is a stimulus equal to 1% of U.S. GDP.

Speaking at an interfaith conference at the UN General Assembly in New York this morning, Gordon Brown has just called for global tax cuts, “a temporary and affordable fiscal stimulus” was needed to tackle the downturn he said. Gordon told journalists that he intends to ask leaders at the G20 summit to produce fiscal stimulus packages of tax cuts and spending increases to “stimulate growth in our economies”.

Perhaps Gordon didn’t notice that George Bush actually got his temporary stimulus in at the beginning of the year, whilst our far-sighted financial genius has yet to even announce his growth package, which is probably why US GDP growth last quarter was not quite as bad as UK GDP growth (-0.5). How is he going to blame that on America?

Gordon also warned against protectionism, a strategy that has proved to be “the road to economic ruin in the past”. Obama ran on a protectionist ticket.

The Tories are calling it a “tax con”, because debt may rise and taxes may have to go up later, of course if we don’t cut taxes and growth is even worse, tax revenues may well still fall and government debt will rise anyway. Under the Tory plan however the economy will have been additionally weakened by the heavier tax burden. This used to be orthodox Conservative economic analysis, it seems the last supporters of Brownite fiscal rules are in the Tory treasury team…

• To present himself as the respected elder statesman of international finance – never mind Sarko’s pretensions.

• To frame Britain’s problems in an international context. Sterling’s collapse is to be spun as nothing to do with Brown’s bubble.
• To frame any domestic tax cut U-turn as a co-ordinated international action. This will give him cover for abandoning everything he has told us is important for all his front-bench political life.

Why Gordon thinks it imperative to be portrayed as some kind of respected international finance genius eludes Guido. It won’t save anyone’s job, not even his own.

There is obviously an international angle to the credit crunch, but there are also domestic disasters which happened on his watch.. Sterling’s collapse is not random. Who for instance decided to exclude house prices from the Bank of England’s inflation target which meant we had a ridiculously loose monetary policy?

If the G20 endorses a policy of tax cuts - if – Gordon will have political covering fire to return to Westminster to cut taxes and bugger the deficit. The Pre-Budget Report on Monday week will be his chance to unveil an epic tax-cutting stimulus package U-turn. The Osborne-Letwin* designed response as it stands will be “we shouldn’t be here, you shouldn’t do that”. Preaching fiscal sobriety to the fiscally hungover after the party has finished and the house is already wrecked.

The Tories have boxed themselves into holding to a Brown orthodoxy on tax cuts to which he himself no longer adheres. Time to think outside of the box…

*Letwin’s aversion to tax cuts might have something to do with the 2001 election campaign fiasco when as a junior finance spokesman, he was forced into hiding after disclosing that the Tories had longer-term plans for £20 billion of tax cuts.

The Fink has generously given space to Clegg on his blog to argue the LibDem case for tax cuts. Which seems fair enough given the argument we have been having has featured Clegg’s proposals quite centrally. Danny has mocked Clegg, claiming tendentiously that that the Tories would reach LibDem levels of popularity if they advocated tax cuts. Clegg has come back all guns blazing:

Danny Finklestein is wrong, and cutting taxes is right, and here are some reasons why: Danny thinks that offering people on low and middle incomes a tax cut is a ‘con’- a short term promise intended to fool voters…. Growth is what we need now. Funded tax cuts help give us that. Without growth there’s no earthly way we’ll be able to balance the books over the economic cycle. Far from being irresponsible, as Danny alleges, tax cuts at a time of recession is the responsible thing to do… Why does Danny think it’s impossible after a decade of spiralling Whitehall spending to find 3% of that money that could be put to a better use? That’s what Gordon Brown says – the Government knows best, and the rest of us are not allowed to question the way he spends our money…. this isn’t about the media. It is about being clear and bold on what is needed at a time of growing economic distress. I may have failed to persuade Danny, but I suspect time will prove me right.

Exactly. Growth is the only way out of recession. Stimulus has to be more than just about monetary policy. Danny’s focus on the politics of a tax cut has blinded him to the economic imperative.

UPDATE : Fink fisks Clegg here. Danny has just emailed to say “drawing a party leader into a bloggers debate between you and me is a signal that Hazel Blears is wrong.”

NZ Labour ran on exactly Gordon’s U.S.P.*, and it didn’t work. The voters in New Zealand overwhelmingly disagreed with Labour’s message, change and tax cuts won big in New Zealand. The “novice” promising tax cuts won.

Danny Finkelstein says voters don’t believe politician’s promises of tax cuts, Fink argues there is a credibility issue. John Key’s first manifesto pledge gave the three actual dates he would cut personal taxes for New Zealanders, a promise to take to the bank. His party won big.

Obama, another novice, ran promising tax cuts for 95% of Americans. The “novice” promising tax cuts won.

The incoherent Tory response to the financial crisis is manifestly weak, Osborne’s performance has disheartened even his own supporters, the lack of a clear message has weakened their credibility on economic issues significantly in the polls. Maybe Michael Ashcroft will have learnt something useful during his recent time with the NZ Nats that will influence the Tories for the better.

Times have changed, voters want the pendulum to swing back from spending towards tax cuts. Rumours are circulating in the Westminster Village that Gordon and Alastair are preparing to announce tax cuts. Which will, even if they are only rhetorical tax cuts, in a stroke make Dave and George look ridiculous as both Labour and the LibDems promise tax cuts and the Tories are left high and dry stranded on the high tax centre ground with only Danny Finkelstein for company. The old strategy may have been strategically right during the decontamination phase of Cameron’s leadership, it is so wrong for now. The recent electoral lessons from the rest of the English speaking world show that to “seal the deal” people now need a positive reason to vote for the Tories.

See also: NZ Nats Tax Calculator.

*Unique Selling Point

After a bad start Guido is beginning to warm to Clegg. He is clearly one of us right-wing “punk tax cutters” that Danny Finkelstein warns his readers about. He is advocating a “socially just” income tax cut of 2p and the LibDems also back substantially raising tax thresholds as well. This would really help millions of people on lower incomes and give them a greater disposable income. We need economic growth and boosting private spending is the best way of doing it.

The Cameroons are being out-flanked here, listening too much to the Fink re-fighting the 2001 election campaign in his column every week. (Did you know he used to work in CCHQ? No? He did, really.)

Like a First World War veteran of the trenches, Fink is so traumatised by the destruction meted out by New Labour to the Hague-led Conservatives in 2001 that he suffers a policy version of post-traumatic stress syndrome. As soon as he hears the phrase “tax cut” he has flashbacks to New Labour’s old line of attack on “cutting public services”. The conditions are very different today, voters attitudes have changed, they know that tax and spend policies can’t be afforded now. Voters realise, as Clegg rightly says, that the public sector is bloated after a decade of big government policies. Voters want, poll after poll confirms, a tax relief agenda – tax cutting was once the Tory Unique Selling Point. The LibDems are the weather vanes of politics, the Tories should not allow them to take the wind out of their sails.

Mandelson remains unrepentant and says he would be happy to meet Oleg the Oligarch again. At least George Osborne won’t be cavorting around on billionaire’s yachts:

“I think I did make a mistake. In politics it is not just what you say and what you do, but how things look. This did not look very good and I regret that…”

He sounds like he is willing to take his punishment.

Why was Peston gunning, with Nick Robinson, for Osborne this morning on the Today show? Some speculate that it is payback for the generous tips of recent weeks that have come Pesto’s way. Guido suspects they are wrong.

Could it be something to do with the complaints to the FSA and the SFO from Tory MPs which, rightly or wrongly, Peston believes is being coordinated by Osborne’s office. Was there an element of personal animus? Surely not from the objective and impartial BBC….

It is a fascinating world inside the ruling elite isn’t it? Rupert Murdoch parks his yacht offshore from Nathaniel Rothschild’s sunshine estate and drops in. Mandelson and Osborne take a ride in the same billionaire’s boat when not dining together. All very cosy, enough to turn you into one of those crazy conspiracy theorists…

Guido has just got back from Bloomberg’s City HQ (a cross between a nightclub and an art gallery with offices above). He was there to hear what had been billed as Cameron’s speech in defence of free enterprise and the start of the counter-attack on Gordon’s handling of the crisis.

First the good news: the Tory diagnosis of Brown’s errors that have got us where we are is coherent. The mistaken emasculation of the Bank of England is critical to understanding what went wrong with British banking. The Brown Bust is going to be worse for Britain than the credit crunch is going to be in many other countries because the government’s finances are so weak. Dave told the City audience that, basically, they would not have got us into this situation because they would have held down public expenditure – the traditional role of centre-right governments the world over. Fine. But we are where we are.

Now the bad news: if the Tories were in government tomorrow they offer next to nothing to get us out of the mess we are in. There was no road-map out of recession. The Tories promise to be “responsible” with the economy is just an echo of New Labour’s pre-1997 promise to be “prudent”. It is political triangulation to neutralise Labour’s tried and tested attacks on “Tory Cuts”. Guido heard only two concrete policy initiatives repeated; a freeze on council taxes and the removal of the requirement for retirees to purchase pension annuities.

The freeze is worth some £50 to £100 per household per annum. The change to pension planning applies to less than 1% of the population per annum. Not exactly policies to get us out of recession are they?

There is no “responsible” route out of recession – we need radical action to rescue the economy. We need a growth package and we need it fast, the sooner it is in place the quicker we will be out of recession. On the back of an envelope Guido reckons raising tax thresholds £1000 will cost £6 billion or so per annum. It will boost household incomes accordingly, putting money into the economy the best way, not via the state, but from spending decisions by those hard pressed families politicians are always on about. Forget the PSBR and the golden rule, that has just been overshot by 100% plus, you can’t prudently get out of recession, you need to stimulate growth.

The U.S. will be out of recession faster because they have already put $500 billion into the economy with a tax rebate and because both presidential candidates are running on a platform of more tax cuts to boost growth. The Tory plan for responsibility is a plan for prudence, not a plan for growth. Wrong policy, wrong time. Is that it?

Osborne and Cameron always emphasise that they won’t be reckless with the economy, they also say we now have the highest levels of taxation ever. Isn’t it actually reckless to maintain that level of a tax burden on an already depressed economy?

UPDATE : A tax wonk tells Guido that for £20 billion we could raise tax thresholds some £3,000 per annum. Even better. That would be real help, for real people in the real economy.