The challenge for Alistair Darling was to offer Labour some kind of platform upon which to fight the next election, while owning up to the worst set of economic figures since the end of the Second World War. But while the 50p tax plan [50% tax rate] undoubtedly discomfited the Tories, his confessional budget speech left senior Conservatives privately relieved, convinced they had just taken another big step towards winning the next election.

“There were no clever wheezes - there was the 50p to try to wrongfoot us, but we can step round that. Otherwise it was the effort of some pretty exhausted people. They looked overwhelmed by events,” a member of the shadow cabinet said, noting how events had boxed in the chancellor [UK finance minister].

“The figures are back in politics. The numbers have driven the choices. There has been a whole generation of politicians and journalists that are so used to politicians ... being able to spend money, and choose priorities that we have forgotten that sometimes, as in the 70s, politicians have no choice, and like today the figures determine everything.”

The Tories believe the dire state of the public finances has finally shot to pieces Labour`s economic credibility. Asked what he would have done had he been in Darling`s shoes, the senior Conservative paused before saying “Either I would have cut public spending much more, so reducing our political room for manoeuvre, or I would have gone for broke and just taxed the rich and given out at the bottom end. They have done neither one thing nor the other. He has taxed everyone, and done very little on child poverty. I don`t know who he is trying to please by all this.”

That damning verdict from the top of the Tory party was not, of course, echoed by Labour MPs. Backbenchers argued that Darling had done his best in impossible circumstances.

“Our best hope was that he could keep us in the game for later in the year,” one said. Another joked “There was so much bad news in the budget, it ended up being a good day to bury some of it. We might as well get it all out as quickly as possible.”

The measures of economic gloom were remorseless record levels of unemployment under Labour; record borrowing of GBP175bn ($256bn), twice the estimate of less than a year ago; record interest costs of GBP43bn a year, more than the schools budget; a record post-war recession of 3.5%; and no return to fiscal balance until 2018.

David Cameron, spoilt for targets, crowed “This is not just boom and bust. It is the worst boom and bust ever.”

The chancellor`s only scrap of comfort was to point to the help offered to unemployed people, and note that the Tory recession of the 1980s had also seen record interest rates.

One year before the election, the two big political judgments for Labour were to do with how optimistic to be about the possibility of a recovery this year, and how to distribute the pain between tax rises and spending cuts.

Those involved in the discussions inside the Treasury in recent weeks said that these big judgments were resolved between Darling and Gordon Brown before the weekend. There were to be big tax rises for the rich, and continued growth in public spending. Whatever else that had to give way in the face of the wrecking ball of the collapsing public finances, Labour`s chosen electoral dividing lines on tax and spend had to remain standing.

Darling certainly made a clean breast of the dire state of the deficit - admitting it would reach GBP175bn this year - but made a very optimistic growth forecast to protect his continued public spending increases. But the Treasury`s projected bounce back out of recession in 2011 was widely regarded at Westminster, in the words of Vince Cable, the Liberal Democrat Treasury spokesman, as “pure fantasy”. Equally the forecast of a recovery of 1.25 per cent growth in 2010, on which Labour`s electoral prospects rely, looks equally implausible. The IMF, in its forecast published on Wednesday, saw Britain contracting by 0.4 per cent next year.

The Treasury admitted its forecast was more optimistic, but insisted this was not wildly out of kilter. However, the Tories argued that if the IMF was right, the British budget deficit would be the worst in the G20 next year and would require an extra GBP23bn of borrowing.

In the pre-budget report, New Labour [the British Labour party repackaged under Tony Blair in the 1990s] had started to break with its ideological commitment to rein in taxes on the rich, crossing if not a Rubicon, then at least a tributary of the Rubicon, by announcing it would introduce a new top rate of tax of 45p from 2011 for those earning over GBP150,000.

There was an agonised attempt by flag carriers to insist that New Labour had not died. That argument has fallen apart. Just 600,000 people earning over GBP100,000 a year are going to be asked to fork out over GBP6bn in 2012 to start to fill the hole in the finances. Buried in the footnotes are the revenue-raising details that show those on GBP150,000 a year will pay GBP4,000 a year more in tax and those on GBP100,000 an extra GBP2,000 a year.

Lord Mandelson, the UK`s business secretary, started on Wednesday the long process that will run until election day of trying to flush out Tory plans for public spending. He said “They are playing hide and seek with the electorate. They don`t support our invest-to-grow strategy, yet they will not say how they will cut spending. Not showing your hand in any way is in not going to win them the next election.”

On a day when the political landscape was changed forever, Labour can only hope its one-time great strategist is right.—Dawn/The Guardian News Service