The end of the affair?

Mr Brown is putting his reputation on the line

Is it all over for Gordon Brown and Prudence? Here is what BBC's Political Editor Andrew Marr and Economics Editor Evan Davis had to say on Radio 4's Today programme.

Question: Evan first of all, listening to Gordon Brown talking on the programme a few minutes ago and saying that dear Old Prudence was still a friend and she hadn't been chucked - what did you make of that?

Evan Davis: It's sounding less convincing than it did a year ago.

It's not that he is being imprudent, it's just that he's being optimistic and obviously if you're optimistic, all your spending plans appear affordable and there is quite a lot of optimism built into his economic forecast.

Question: Not as much as there was six months ago.

Evan Davies: No, I think there's more optimism built into the later years of his economic forecast than there was six months ago - it looks less plausible than it did six months ago.

What he's essentially assuming is that there's no sharp correction to anything.

We maintain a very big trade deficit over the next few years - the Pound doesn't have to fall very dramatically to correct that.

Evan Davies: 'Fireservice has no recruitment problems'

Consumption gently glides down - which is exactly what we all want to happen - his borrowing rises by a bit and that sorts everything out.

But economies often don't seem to work like that.

It's great if everything works very smoothly but one rather thinks that that's just a feature of these Treasury models - that they just smooth everything out and make it all happen very smoothly.

But economies often work in very sharp corrections - very big lurches from one thing to another.

And the house price issue, I think is quite interesting actually.

There's an argument going on inside the government

Andrew Marr, BBC Political Editor

What his book - the published document - actually says about house prices yesterday - it says quite a lot - but one of the things it says is: recent developments don't foreshadow a repeat of the late 80s.

There may be structural reasons why house price have increased permanently.

Now that's just the kind of thing when you hear, little alarm bells ring and I start thinking sell, sell - this is obviously a leading indicator that it's all about to go wrong.

So it's not that he's being imprudent, it's just that he's being quite optimistic.

Now that doesn't matter for the moment because I don't think anyone would say at this juncture, he should raise taxes or cut his spending plans - it's far too soon - everything might come right - I think it might well come right. But by the time of the next big spending review, which is in a couple of years' time -just before the next election - very inconveniently - we may face some really sticky decisions if it doesn't all go right.

Question: It is a game Andrew - if that's an appropriate word to use - that's being played at length. This is for the long term isn't it?

Andrew Marr: Yes, it certainly is and Evan's right, there is a risk obviously involved in what the Chancellor announced yesterday.

But just think of the two alternative risks that Evan was mentioning: either cutting spending or raising taxes. Now what is New Labour for?

In Gordon Brown's view, it's to do two things - it's to redistribute money to poorer voters, which he is doing at a fair old rate actually and of course it is to "save" the old welfare state - the post-1945 settlement.

Now if he starts to cut the spending now for that, the question of whether Labour has any purpose at all would raise that.

The alternative of course is tax rises.

Question: How concerned are people in the Government about, what we might call, middle-class nerves?

Andrew Marr: There's an argument going on inside the government about that.

There are plenty of people who are picking up enough worry - they're worried about the effect of the national insurance hike and the other tax rises come the Spring.

And they look at something like university top-up fees.

Question: I was going to mention that, yes.

Andrew Marr: Well, you know you go to any - certainly any London - dinner party, you talk to people in shops at the moment - there is extreme concern and anger about the prospect of having to pay for children's university education.

And it's the kind of issue which could suddenly tip things over the edge.

That's what a lot of people in the government think - that's what a lot of people in the Treasury think.

There are others, I have to say, who look across at Iain Duncan-Smith and the Tory party and say well actually unless we really bog things up, we're going to come in again anyway.

It's not the case that the health service is going to copy the firefighters

Evan Davis, BBC Economics Editor

So there is an argument inside government - not between complacency, because the people who think they're going to win again away are the ones who are saying therefore we should take the tough and bold decisions and make the difficult radical reforms however much the newspapers scream, however much the revolt seems to happen.

And there are others who say, look politics is actually much more volatile than it appears on the surface and we do have this fantastically large Commons majority - that we get something like top-up fees wrong and it would be snow off a dyke, you could suddenly find an extraordinary political turnaround.

That is a real argument inside government.

Question: Evan...There will be big rises it seems for NHS staff. How important is it for the government to get things like that right from the point of view of policy to the public sector?

Evan Davies: Very important.

You have to draw a very distinction between cases where there are pressures for higher pay, like in the firefighters because they firefighters want more pay and there's a sense among quite a few people that there's a justice in that and cases where higher pay is part of the reform agenda and part of the delivery agenda - and the health service is in that latter category.

Let me explain: essentially, because there are recruitment difficulties and motivation difficulties, they need actually to re-grade, restructure and pay more before they can deliver all the promises they're making about improved service.

What I think has irked Gordon Brown about the firefighters' dispute is that's not the case - they don't need to pay more for firefighters because recruitment isn't a problem.

Question: There are not 40 people for every job as a hospital porter.

Evan Davies: Exactly. Recruitment is not a problem there.

But it's very important - it's actually an argument against the government and to this extent - it's not the case that the health service is going to copy the firefighters because we need to pay the health service more, regardless of what happens to the fire-fighters in order to recruit and get the staff that they want.

So to some extent when Gordon Brown says, I don't want my extra spending to be dissipated in higher pay, there's a bit of a confusion there because of course some of the time you have to pay more because that's part of getting better staff and getting more of them.