"So ask me," said the veteran music hall comedian, "what is the secret of my success." The adoring fan began: "Tell me, what is ..." "Timing!" interrupted the veteran comedian, before his interlocutor could go any further.

It's an old story, but very relevant to the present economic debate. There can be no doubt, as the opposition and the governor of the Bank of England have no hesitation in reminding us, and Robert Chote, director of the Institute for Fiscal Studies, forcibly told the Society of Business Economists' annual meeting last week, that the country faces a huge medium-term fiscal crisis. The prime minister is said to be at best unaware of the scale of the crisis, and at worst the perpetrator of what Churchill famously described as "terminological inexactitudes" on the subject.

But it is to the credit of Mervyn King, the governor, and more seasoned Conservatives, such as my old friend Kenneth Clarke, that they are not calling for dramatic cuts in public expenditure, or frightening tax increases, to take effect immediately. It is all a question of ... timing. King and his colleagues on the monetary policy committee are doing their best to dampen exaggerated expectations about "green shoots" and economic recovery. The general situation is still pretty grim. It is not a "recovery" when the rate of deterioration slows down. Nor will it be a recovery by traditional standards if the 4.3% decline in the UK's gross domestic product now forecast by the Organisation for Economic Co-operation and Development for this year is followed by a modest upturn.

One has to remember not only the sensational scale of this recession, but also the lost output, or unrealised potential for an increase in living standards, arising from the fact that the economy is not growing at the trend rate of (perhaps: there is much debate) some 2.5% a year. The loss would be a lot greater if it had not been for the fiscal (tax cuts; higher public spending) and monetary (reduced interest rates; desperate efforts to boost liquidity in the economy) measures taken by the Treasury and Bank of England.

My suspicion is that, when the time comes to make a start on reducing the deficit, the real debate will not be between "Tory Cuts" and "Labour investment" (it seems to be commonly accepted that there will have to be cuts), but between "deep spending cuts accompanied by tax cuts - or no tax increases" (a Cameron government) and "unavoidable, but fewer, spending cuts accompanied by tax increases" (a Lazarus-style resurrected Labour government).

Recovery was impeded several times after the Great Depression of 1929-32 by premature fiscal tightening. And, for all the concern about the "structural" budget deficit - ie, that element not accounted for by the cyclical impact of this Great Recession - I cannot help feeling that, after a period of robust recovery, that deficit might look less "structural" than it appears to be at present.

This minority view is born of long experience of the vagaries of public finance. And it begs the question, because for a variety of familiar reasons, "economic growth" may be a more arduous process in the future. But a credible medium-term fiscal plan will eventually be needed. Ironically, it will be needed to impress those financial markets that have got it so spectacularly wrong, and which, in the case of banks, have been bailed out (or can rely on being bailed out) with public funds that contribute to the rise in the deficit - as, indeed, does that part of the recession attributable directly or indirectly to the financial crisis.

One of the reasons the Bank is so bearish about the recovery is that it knows that insufficient credit is getting through to industry. After the feast, the famine. There is plenty of credit getting through to the bankers themselves, however. How lucky they are that the drip torture of the political system by the media has diverted the wrath of the nation from bankers to politicians. And how unlucky for so many decent politicians that they have been tarred with the same brush as the minority of miscreants.

So we have a "Labour" government coming to the end of its life having achieved little on the inequality front but apparently still being too craven to take on abuses of the financial system, even when it has rescued the wretched system. You could not make it up. As Gore Vidal says of a world in which the financial elite are offered carrots but no sticks, it is a case of "socialism for the rich and capitalism for the rest".

Almost all the analysts who have been helping the Queen with her inquiries into what brought about the crisis cite the distorted rewards system as one of the key factors provoking excessive risk-taking. And here we go again.

I was particularly struck by an article on The Banking Crisis and Inequality (World Economics January-March issue) by Tim Lankester, a distinguished civil servant, now President of Corpus Christi College, Oxford. He argues that the growth in inequalities of income and wealth in the US and UK in recent decades - quite apart from any moral and social aspects - itself contributed to the financial and economic crisis. He sees the huge increase in top incomes, supplemented by massive borrowing, as having driven up property prices, which forced families on middle and lower incomes to borrow beyond their means: "When the financial and property bubbles burst, falling prices reduced the value of collateral pledged by borrowers - thus weakening the banks' balance sheets."

He concludes that in capitalism's last great crisis, in the 1970s, the problem was the declining share of profits and the rising share of wages and salaries. In the latest crisis the problem has been that "too large a share of national income has gone to high-income earners and not enough to the lower paid".

In other words, by kowtowing to the financial elite, policymakers on both sides of the Atlantic helped that elite to wreck the system. And, with the intriguing exception of Mervyn King, they are kowtowing all over again.