The most serious threat to Gordon Brown and his Government is still economic, not political. The past few weeks, and especially the past ten days, have been awful for him: the impression of drift, incompetence and lack of grip. Such episodes have a habit of passing, although the resignation last night of Peter Watt as Labour general secretary over the funding scandal suggests that Mr Brown’s dire November is not over yet. There will be dreadful headlines today for Mr Brown and Labour.

Nonetheless, the obituaries are premature. Mr Brown and his Government are not about to implode. He has a secure majority and time on his side. A general election need not be called until May 2010 and to judge by the, obviously coordinated, comments of ministers Mr Brown has decided to play it long.

The best thing he can do is to try to lower the political temperature, to dampen an electioneering mood. The only way he and Labour can win the next election is by proving that they are a competent Government addressing the country’s problems.

Mr Brown was right yesterday in his CBI speech to play to his strengths by underlining long-termism – on transport, planning, energy, the environment, managed migration and taxes and deregulation for business – as he will no doubt repeat at his news conference this morning. He was eager to underline his credentials as a reformer, to answer charges that he is watering down Blairite changes to public services. In answer to a question from Richard Lambert, the Director-General of the CBI, Mr Brown emphasised the involvement of the private and voluntary sectors in a series of welfare-to-work announcements this week, as well as in education and health (although there are greater uncertainties there).

Within the Government, Mr Brown needs to sharpen the efficiency of his operation and decision making, involving more ministers and advisers. On some second-rank issues this has already happened. In the absence of the rivalry between No 10 and the Treasury there is smoother collective decision making in Cabinet committees and the official troika at the centre of the Cabinet Office – Sir Gus O’Donnell, the Cabinet Secretary; Jeremy Heywood, in charge of domestic policy; and Gill Rider, head of human resources – are seen in Whitehall as providing more effective coordination of new policies.

None of this will matter, however, if the economy goes sour. Mr Brown repeated his familiar theme yesterday about taking no risks with “our hard-won stability” but the Treasury Committee said in its analysis of the Pre-Budget Report that many of the risks were on the downside: for instance, to the projected strong recovery in 2009 if the financial sector remains subdued; over trends in house prices and household debt; and to the level of tax revenues and public finances. This does not mean that we are heading for a fiscal crisis.

The margins of “prudence” are already so tight that there is no room for any slippage. If the slowdown next year is worse than expected by the Treasury, or the recovery slower, and delayed, then Labour could be in real trouble and be unable to produce any pre-election sweeteners. Scandals erode confidence in a ruling party, but the state of the economy decides elections.

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