It is not surprising that Britain's largest economic downturn since the war should have seen the largest ever peacetime government budget deficit. By the end of this year Britain's output will have fallen by about 5 per cent since the crisis started; in the same period the budget deficit will have risen by between 5 per cent and 8 per cent of output. Arithmetic so simple that even a child can understand it: smaller output, smaller revenues, larger deficit. And the corollary: larger output, larger revenues, smaller deficit.

The deficit for 2009-10 is projected to be ￡178bn (€200bn, $287bn), about 11 per cent of gross domestic product. There is some dispute as to how much of this is “structural” and how much “cyclical”. The “structural” deficit is the gap between government revenue and spending that will have to be closed by higher taxes or lower spending. The “cyclical” deficit is the gap that will automatically disappear when the economy has recovered. Those who say the downturn has added 8 per cent rather than 5 per cent to the deficit argue the recovered UK economy will be smaller than the pre-recession one, hence the recovery will leave a gap of ￡132bn rather than ￡100bn. Whatever the right number, no one doubts that there will remain a sizeable fiscal problem, even after the downturn has been reversed.

But why has the financial press been almost unanimous in condemning the modest pre-Budget measures announced by Alistair Darling, chancellor of the exchequer, to protect total spending in the face of a massive collapse of private demand? Why are the markets howling for “fiscal consolidation” now – ie cutting fiscal support to the economy immediately – when it has plainly not yet recovered?