The Treasury, with uncharacteristic generosity, lent a helping hand to the Ministry of Defence today. Other Whitehall departments with cash problems will have taken note.

Breaking with normal practice, the Treasury let the MoD keep a “substantial proportion” of the proceeds from selling the remaining government stake in Qinetiq, the defence research company. Usually such proceeds are jealously guarded by the chancellor. As one frustrated official handling a department asset sale once told me: “we do the selling, they do the spending”.

An exception has been made for the MoD because they are so short of money (this piece gives the background to the negotiations). The department is struggling to pay for two wars and a defence equipment programme that it could never afford.

The up to £275m it will net from the Qinetiq sale will come in handy. But it is no answer to their budget problems. For the MoD books to balance, the Treasury will need to be a lot more generous, or Gordon Brown will have to sanction some high-profile defence equipment cuts. There are no good options.

Alistair Darling may or may not be correct to say that economic times are “arguably the worst they’ve been in 60 years”. The UK may be facing recession but is not quite there yet. I’ll leave that debate to economic historians.

More depressing is that his honesty has been met with such an over-wrought media furore. Those damning the Chancellor for his “gaffe” are no doubt the same ones who accuse politicians of being mendacious and dishonest.

This is where we are; house prices are falling, banks are writing off tens of billions of pounds, mortgage lending has slumped by two-thirds, the price of oil has leapt since last year, retailers are reporting falling sales, the stock market was recently down 20 per cent from its peak. It’s not exactly rosy.

Do we really want senior cabinet ministers to continue pretending that everything is alright?

Here is some intelligent analysis of the situation.

UPDATE: Evan Davies agrees. Even if the rest of the commentariat doesn’t.

Vince Cable held a press conference this morning to outline various ways to ease the pain in the housing market. I’m not sure any of his suggestions will make a massive difference (they include letting housing associations borrow more to buy up empty homes***).

But credit to the Lib Dem Treasury spokesman, who has long been alert on this issue. As he reminds us, Labour MPs were literally laughing at the idea of an imminent housing crash - as recently as the spring.

Here, as a sorry reminder of government complacency, are extracts from the Hansard account of a debate in April on a Lib Dem-led motion on the housing bubble:

Angela Eagle, exchequer secretary to the Treasury: “The Liberal Democrat motion has been much commented on, possibly because it reads like the storyboard for “Apocalypse Now”, or perhaps even “Bleak House”. According to the motion, we are facing an “extreme bubble in the housing market” and the “risk of recession”, and we must “act to prevent mass home repossessions”.

Presumably that is why the hon. Member for Taunton (Mr. Browne) got through his entire speech without mentioning any of those things until the last minute—they obviously keep him up late at night.

Fortunately for all of us, however, that colourful and lurid fiction has no real bearing on the macro-economic reality. In difficult economic times—here I find myself in agreement with the hon. Member for Fareham (Mr. Hoban)— [ Interruption. ] —at least in part; I do not want to get him into trouble. In difficult economic times, it generally pays to remain calm and to apply a cool, analytical mind to the situation. Hysterical over-reaction, as this motion demonstrates, might attract a few cheap headlines and some doom-laden Lib Dem press releases, and it might even frighten a few voters ahead of local elections, but it is not mature or responsible, as my hon. Friend the Member for Leeds, East (Mr. Mudie) took some time to point out.

Now that we have had “Apocalypse Now” and “Bleak House”, I am going to talk about “An Inconvenient Truth”, which is that the economy is strong and stable.”

later….

Siôn Simon (Birmingham, Erdington) (Lab): ”It is alarming me to discover that people as esteemed as the Liberals think that we are in the grip of an “extreme bubble”. If we are in an “extreme bubble” now, could she tell us what sort of bubble we were in during the early 1990s when people’s homes really were being repossessed by the hundreds of thousands?”

Angela Eagle: ”…Because our economic fundamentals are right, we can look forward with reasonable expectation to getting out of this situation. The housing situation will be unwound in a relatively calm and orderly way, which is what people need to know.”

Calm and orderly, you say?

*** This now seems to be the government’s big idea, according to The Times on Friday morning. Questions for the government: where will the money come for councils to buy up unwanted homes (occupied or otherwise)? Will central government give billions of pounds to local authorities (if so from where?). Or will it let them borrow more (if so from whom? Most banks are in retreat from anything property-related). This sounds more like a useful mopping-up exercise rather than a measure which will make much difference to the crash.

Expect an official announcement on Tuesday. It will also be interesting to see what’s changed since Caroline Flint spoke to the FT in June:

The housing minister is pressing ahead in the area where she believes she can make a difference - using the clout of public sector bodies to help housebuilders, not only by buying thousands of new-build homes from them, but perhaps by changing payment terms so registered social landlords pay more upfront.

The scene: A newsroom. The date: September 2008

Reporter (on the phone to Treasury).

“So this windfall tax…”

Official

“It’s not a windfall tax”

Reporter

“OK well it certainly sounds like one. Aren’t you raising billions from the energy companies?”

Official

“Um”

Reporter

“Something to do with ETS?”

Official

“Under the EU’s emissions trading scheme (ETS) companies get permits which allow them to pollute. They can trade these amongst themselves. In the first round they got the permits for free. In the third round, which begins in 2012, they will have to pay for all of them.

In the second round, which has just started, they will have to buy just 7 per cent of the permits on average. That mean figure ranges from electricity companies having to buy over 30 per cent of their permits to steel and cement companies being exempt for now.

The process has already started and will raise £1.7bn-£1.9bn over four years. The money will be frontloaded, with greater cashflow this year and next. So I would imagine you’re looking at well over half a billion before Christmas.”

Reporter

“So it’s not a windfall tax?”

Official

“You can call it whatever you like. Ministers are also thinking about shifting the 7 per cent figure to 10 per cent - the maximum allowed under EU rules at present. That would bring in another £700m or so. And you could frontload the process further to get even more of the money now.”

Reporter

“But there won’t be any clawing back of the estimated £9bn which energy companies have got from their free permits?”

Official

“Well, maybe a smidgeon. If they raise it from 7 to 10 per cent. ”

Reporter

“I’ve just thought of something. I heard that Gordon Brown wants a big giveaway for 7 million families this winter. Up to £150 each to help with bills. That would cost just over £1bn. Maybe this ETS thing could cover that?”

Official

“You might think that. I couldn’t possibly comment.”

10 minutes later

Reporter

“I’ve got this great story. It’s a bit complicated though - have you got five minutes?”

News Editor

“What’s the top line?”

Reporter

“Well, energy companies are paying up a billion, well, much more than that actually, and Gordon will probably use it to help the poor.”

News Editor

“£1bn Windfall Tax on Energy Companies Revealed!”

Reporter

“It’s not really a windfall tax. And we knew it was coming, well, the industry did, apparently.”

News Editor.

“Explain it. But I haven’t got much time.”

Reporter

“Under the EU’s emissions trading scheme (ETS) companies get permits which allow them to….”

News Editor

“Boring”

Headline the next day: “£1bn Windfall Tax on Energy Companies Revealed!”

One week later…

Gordon Brown: “We are raising ONE BILLION POUNDS from the energy companies to help the most vulnerable people in our society with their fuel bills….” cheers from Labour backbenches etc etc