You may have thought that the dust had settled on the public spending row after the Tories last week obtained a Treasury document showing plans for departmental cuts of 9.3 per cent over four years. This seemed to prove that Labour promises of further investment were a smokescreen at best.

Could Gordon Brown deny that this was the case? It was hard to rouse anyone from Downing Street to rubbish the 9.3 per cent figure last week. After all, it is there in black and white in a government document.

But the prime minister has today tried to wriggle out of his tight spot.

He told Simon Mayo:

“No, I don’t accept these figures, this was a leaked Treasury document that I have never seen and there will be lots of…(interrupted). Hold on, there would be lots of documents that would be around the Treasury looking at different potential options, but we have said we can maintain frontline services….”

He then goes on to suggest that there could be some “extra growth” which will be registered in the Pre-Budget Report. Interesting if this is the case. If not, this appears to be new evidence of Mr Brown’s stubbornness.

For my money Chris Giles has provided the best explanation of the baffling blizzard of public spending numbers.

The FT’s economics editor points out that current expenditure will indeed rise (slightly) every year to 2013/14, as promised by the prime minister.

But as Chris explains:

“Current expenditure includes the salaries of vital public service staff, paper-clips and, crucially, also the interest payments on government debt and social security costs.”

If you also factor in capital spending cuts you end up with the really painful numbers - ie the 8.6 per cent real terms cut in departmental budgets (or 13.9 per cent if you exclude health and overseas aid).

Meanwhile our political editor George Parker today questions how Gordon Brown tied himself in knots over the question of spending cuts:

“Privately cabinet ministers despair of the prime minister’s propensity to court political trouble by refusing to acknowledge the truth or by trying to avoid difficult questions. As one senior Labour figure put it: ‘He never learns.’”

He finally said it. There will be cuts. But Gordon Brown waited until he was nearly half an hour into his speech to admit it. (Bottom of page 7 out of 8).

And he wedged the stuff about deficit, hard choices, sustainable finances, cutting costs into a handful of paragraphs. The rest of the speech was the usual glorious talk about saving the global economy, the national economy and the range of initiatives which Labour has thrown out in the last year. And - to be fair - there were two genuinely big policy pledges.

More paternity leave and the swift implementation* of the temporary workers directive will please unions and, you’d have thought, workers. The business lobby might not be so happy but neither concept is exactly a surprise (the only question on the directive was its exact timing).

*UPDATE

My eagle-eyed colleague Jean Eaglesham points out that the government is only putting the temporary workers directive on the statute book in the next Parliamentary year. This is not the same as the implementation date. We still don’t know when that is going to be. In other words, this may not be much of a gift to the unions (and temps) as it sounded at first.

The union leaders don’t want to admit it. Brendan Barber argued this morning that Labour should keep on borrowing and spending until unemployment is on the way down - which could be several years away. But the simplistic debate between cuts and investment is now over.

We’ve now heard Alistair Darling and (today) Peter Mandelson both spell out the new message; that the UK is heading for difficult choices in public spending.

Earlier this summer Gordon Brown was maintaining the illusion that Labour would be able to preserve spending increases in the coming years. Here is what I wrote at the time, as a reminder. (Brown said “They (Tories) would cut savagely by 10 per cent and that is not going to be allowed to happen.”)

Now Downing Street is briefing that Brown has always been fiscally conservative over two decades; an attempt to erase the “investment” message of June.

Nick Robinson argues on his blog today that Labour is trying to rewrite history. Francis Elliott wonders just how great the difference is between the two parties.

Not a lot, you might think. In effect, Labour has been reduced to painting the Tories as maniacal small-state ideologues who - in the words of Mandelson - are “salivating about wielding the axe”. Will the public agree?

Expectations are for a Gordon Brown “recovery” speech on Tuesday when he faces the TUC Conference in Liverpool.

For all the (slightly) better economic/financial data out there, there is still an obvious dichotomy that Britain faces. Do you define the downturn by GDP figures (the formal definition of recession beging two quarters of contraction) or on unemployment figures?

With the dole queue set to grow for years to come, it’s a vital question.

Brendan Barber, head of the TUC, made the point this morning on the BBC’s Politics Show:

I don’t think that’s a real recovery until we begin to see unemployment coming down, and I fear that we, we’re a long way off that.

Alan Johnson was on similar ground, albeit in a slightly garbled way:

I don’t think we’re through the worst of the recession, I, I mean it’s a matter, I think Alistair Darling has led us through this, with Gordon Brown, in, in, absolutely calling every single turn of this the right way. When, when we look at this now, there.. I don’t think we can say that we won’t get any more bad labour market figures, I don’t think we can say that we’re in a situation now where manufacturing is going to recover completely, what we can say, I think, is we’ve seen the early signs, in the construction industry, in consumer confidence, in my own constituency here we’ve seen that the, that the increase in unemployment has kind of levelled off. Now I’d like to think that’s the early signs, but I think there’s a long way to go and what I think the British public need to do as we approach the next Election is listen to the various … plans of the parties for how to get through this…

Of course, no minister wants to prematurely call the recovery. Spotting green shoots is a risky business, as Baroness Vadera found out earlier this year.

Precisely how Mr Brown will address this question on Tuesday will be fascinating to watch. I suspect there will be more rather more about how Labour prevented a financial catastrophe than premature optimism about the imminent future.

According to Sky the speech will include this:

Today we are on a road towards recovery - but things are still fragile not automatic and the recovery needs to be nurtured. People’s livelihoods and homes and savings are still hanging in the balance, and so today I say to you: don’t put the recovery at risk.

“Road towards recovery” is a phrase which covers all options pretty well. It could be a swift road - but also a long and winding one with many potential setbacks etc etc

A brief passage in George Osborne’s last Andrew Marr interview stands out: In it, the shadow chancellor heaps praise at the feet of the world’s central banks for preventing financial meltdown.

“But we say the most effective form of stimulus is monetary policy, is the low interest rates, which both here and around the world I think have been the most effective tool at bringing the world back from the brink of depression.”

A statement of the obvious, you might think. But was Osborne playing up the actions of Mervyn King and others to belittle those of Gordon Brown? A Tory MP suggests that this strain could grow louder as the party seeks to rob Brown of the credit for halting the apocalypse.

For some time now I have been asking the Treasury for an explanation of Alistair Darling’s Budget claim that government actions have saved “up to 500,000 jobs”.

My questions:

1] What research is this based on?

2] Is 500,000 at the upper end of a wider range of estimates; eg “350,000 to 500,000″?

3] How much of the 500,000 is down to political action and how much is due to the actions of the Bank of England - ie quantatative easing and interest rate cuts?

It’s been at least three weeks and the Treasury still hasn’t answered the question. Although they say they may provide more detailed analysis later in the autumn.

Lord Myners gives short thrift today to Tory plans to kneecap the Financial Services Authority and transfer many of its powers to the Bank of England.

In an interview with City AM (the freesheet) the City minister says the central bank neither wants nor has the right skills for the job. He portrays the Bank as an ivory tower full of chin-stroking academics.

“They (Tories) have misjudged the competence and culture of the Bank of England. The Bank is a very academic institution. It is not actually about doing things,” he said.

“The Bank is good at looking at the wider picture but it does not want to be supervising and reflecting on individual banks. Do we want the Bank of England distracted by supervising building societies and insurance companies?”

I was going to blog on Monday about the flaws in George Osborne’s plans but Paul Murphy on FT Alphaville beat me to it. And here is another colleague, Paul J Davies, making a similar point.

Ultimately the reason why financial regulation often fails is because the smart guys aren’t working for the FSA or the SEC: they are making millions of pounds/dollars in the banks.

Chief executives of banks didn’t understand some of the financial products cooked up by youths with PhDs in advanced mathematics. How can we expect low-ranking regulators to be on top of these innovations?

This point is made in a shrewd letter to the FT today by Tim Price of PFP Wealth Management:

“As to the likelihood of the Bank attracting a sufficiently experienced and qualified staff, this gets to the absolute heart of the problem. Short of receiving infinite remuneration, no regulator will ever realistically be able to compete with the so-called “talent” on Wall Street and the City, even if that talent amounts to self-enrichment rather than wider wealth creation.”

See the FT’s Arena blog debate: should the FSA be scrapped?

Expect several front page headlines on Tuesday morning about HMRC’s plunging tax receipts in 08/09 - laid bare thanks to an NAO report. Astute readers of this column will already know about the £20bn-plus fall in tax take - you read it here - because it was flagged up on Budget day in the red book small print. You’ll notice that the coming year is set to be even worse, according to the Treasury’s own predictions.

The real nasty today was another £10bn-plus of unpleasant news, including £3bn of uncollected tax and £7bn set aside for legal claims by taxpayers. The bulk of the latter - a staggering £4.8bn - stems from a single landmark case concluded early last year over VAT repayments. HMRC admitted today that they have already paid £1.5bn as a result of this “Fleming” test case. That’s an awful lot of helicopters or MRI machines.