When the chancellor admits to seeking solace in the music of Leonard Cohen, you know it’s time to take cover. The days of Things Can Only Get Better have been replaced by a longing for the Sisters of Mercy. Even Dear Prudence has been dumped with news that the Treasury is “redrafting” Gor-don Brown’s fiscal rules to allow more government borrowing during what Alistair Darling admits will be a long and painful downturn.

For every voter, opposition politician and fellow finance minister who had to endure Mr Brown’s lectures on prudence and the inviolability of the fiscal rules, their consignment to the rubbish bin has been something to savour. They have been gradually tarnished anyway as the Treasury steadily revised borrowing targets while the nationalisation of Northern Rock and this year’s unintended tax giveaways did for the other rule of keeping government debt below 40% of national income. Every Labour government has faced a crisis in the public finances. This one just took a long time getting there.

The chancellor insists the economy is not in recession and growth will continue, although at the lower end of his forecasts. Many economists disagree. The Treasury’s hope that something would turn up looks like the worst kind of wishful thinking; the mood among consumers and businesses is darkening.

Sir Win Bischoff, chairman of Citigroup, whose bank has been battered by the credit crunch, predicts two more years of falling house prices in Britain and America. If he is right, that will mean more problems for banks and the credit crunch, already described by the International Monetary Fund as the biggest financial shock since the depression of the 1930s. That financial shock has become an economic shock.

Voters do not care about complex fiscal rules, although the financial markets do. What people care about is whether anything is being done to ease their pain and steer the economy towards better times. Mr Darling says the public will not take more tax increases, something this newspaper has said for years. Labour’s lack of prudence was pumping out tens of billions of extra public spending with no regard for whether it was used productively.

So far all we have seen from the government is an emergency £2.7 billion tax concession driven by political expediency, and a promise not to increase petrol duty in the autumn. Ministers are heading off on holiday leaving the economy to stew over the summer.

In the recession of the early 1990s, the government introduced a series of measures, including a stamp duty holiday to stabilise the housing market. This time the response of the authorities, including the Bank of England, has been slow and unsure. Labour’s economic and financial framework is proving to be suitable only for fair weather and is in danger of being blown away by the storm.

Of course economies have ups and downs. Downturns are the time-honoured way of correcting excesses. The risk is that this downturn is more prolonged and damaging than anything we have seen in recent decades. Mr Darling appears to acknowledge that risk, although his response is more that of a rabbit in the headlights than a man at the wheel.

If the downturn drags on, Labour’s only hope in the 2010 election will be the John Major strategy of 1992, which could best be summed up as: “We got you into this mess, so we are the best people to get you out of it.” It may have worked then, perhaps thanks to the Kinnock factor, but it is unlikely to work this time. The public is in no mood to give Mr Brown the benefit of the doubt, and they are showing few signs of being scared by David Cameron.