Fraser Nelson

Estimated number of households in negative equity, 2003-10 If you’re a homeowner, turn away now. CoffeeHousers may remember recent reports of 1.2 million houses at risk of negative equity  – well, that may just be the start of a negative equity tsunami. This Citi graph, the latest in our occasional series, shows what would happen if prices do fall 30% as is widely expected. The left-hand scale is million, not per cent. It presumes 0.5m in negative equity now, rising above 3m – or one in four British households. As Michael Saunders from Citi says in his note: “These calculations are uncertain. But the key point is that, with house prices plunging, the numbers of households in negative equity will probably match or exceed the early 1990s peak of 1.8m.

Now that even Nigel Lawson says tax cuts are not the right way to go, why am I calling for them in my column? Lord Lawson did not issue a fatwa on all tax cuts, but warned against “massive tax cuts.” He is wary of so-called Keynesian fiscal activism – borrowing massively, to cut taxes. As am I. You can argue it’s better than Keynsian spending, but both still do more harm than good. I am arguing that the new era of deficits (I don’t expect we’ll see a balanced British budget for five years) need not lead the Tories to abandon tax cuts. They need a new argument for a new era. One could separate the eras into Before Crash (BC) and After the Downturn (AD). Osborne needs to realise the difference, and recast his policy.

Alistair Darling has not set out a new fiscal framework in his much-delayed Mais lecture - but he has read the last rites over the so-called the financial rules. “To apply the fiscal rules in a rigid manner today would be perverse,” he says. Not to say impossible: the rules set a 40% limit on net debt and it was 43.4% last month. Instead there is assurance that “people should be in no doubt that Government will take the decisions necessary, to ensure sustainability in the medium term." George Osborne – back in action, and with a major speech planned on Friday – has released other Brown quotes which pledge his rules were always and forever.

I was joking when I said a few weeks ago that Gordon Brown spoke about the recession as if it were the SARS virus. But at his press conference this morning, and just now at the press conference with Sarkozy, he has used a new phrase: "stop the contagion". Contagion? If it is, it was incubated in 11 Downing Street as he pumped the economy full of debt, in the hope that he'd never be found out and rates would not rise. The contagion kept touting dangerously underpriced debt until the average British household had borrowed 172 per cent of its income - twice as much as even the Italian household. The contagion from No11 also used debt-concealment mechanisms to disguise £110billion of PFI debt and £600 billion of public sector pension liabilities and even international aid.

The debate about taxes was successfully closed down by Gordon Brown when he persuaded the Tories to equate tax cuts with instability. Actually, even Brown didn’t go this far – this “instability” point was Oliver Letwin’s. Even now, when the disastrous effects of Brown’s economic policy are painfully clear, it’s still hard to get a debate going about an alternative approach. So it was with much excitement that I picked up Art Laffer’s latest book in New York last week – the sort of title you just don’t see in Britain. “The End of Prosperity: How Higher Taxes Will Doom the Economy -- If We Let it Happen”.

It’s funny to hear politicians solemnly talk about “debt-financing”, as if the cash comes down on a moonbeam from the lending gods. In truth, some poor souls have to buy the gilts the Treasury are flogging – and with what? Governments may well find it as hard as the rest of us to find creditors in this global downturn. Especially seeing as the Treasury is flogging a tanking pound, now tainted with the risk of Britain losing its AAA rating (unlikely, but so was the nationalisation of the banks). Consider the sheer scale of cash Brown wants from the City. In 2007/08 net gilt issuance was £29bn – bad enough, but that’s likely to more than treble to £100bn this year. So who will buy?

Phil Woolas has only been immigration minister a few weeks, and is already controversial enough a figure to be pulled from Question Time. A humiliation for him? I suspect his job is going completely to plan. His Times interview in which he called for the population to be capped at 70m looked part of a co-ordinated campaign, slated as it was ahead of his Politics Show and Question Time appearances. He is, it seems, being groomed to become less libidinous version of David Blunkett - a blunt speaker who occasionally ventures over the top. His job will be to say crazy stuff now and again, cause a stir, and in general give the impression that the government is tough on immigration. Blunkett would use words like “swamped” and then let the press go wild.

How bad are the Deripaska allegations for Osborne? At the very least, climbing on board that yacht raises questions over his judgement. But, as with so many Westminster scandals, all hangs on what more is to come. Labour will gun for him as hard as they can, knowing how important he is to Tory strategy. If nothing more emerges than what's in today's Times, he's okay. But if it turns out that he was part of some operation to solicit an illegal donation, he's finished. For my part, I can't believe he would be so stupid as to do this, or to take the view that what happens in Corfu stays in Corfu. Yet I hear reports of blind panic in CCHQ, and I have spoken to two MPs who wanted to discuss whether Hague or Clarke would be the better replacement. People are expecting fireworks.

He’s done it. I blogged a while ago about how Gordon Brown lost his battle to have Northern Rock struck off the books, causing trouble for his oft-repeated Brownie that he has reduced debt from 43% to 37% of GDP. In August, the ONS showed National Debt was 43.3% - and had actually been at those levels for a year. So what was Brown to do? Last week, I reported a rumour that he’d ordered up a new debt series to exclude NR. I said something daft at the time, like “he couldn’t – could he?” Well, he did – and in fact he had by the time I blogged. There is now a new measure entitled “National Debt excluding Northern Rock,” code HF6W.