Economic and political credibility are interlinked. Just as Gordon Brown’s reputation as Chancellor and his succession to the premiership rested on his claims to prudence, so his standing now depends on this record being sustained. Questions about the fiscal rules are not arcane issues for economists, they are crucial politically.

That is why it matters what Mr Brown did, or did not say, in his interview on the Radio 4 Today programme and at his later, monthly news conference. Read one way, the Government potentially has billions of pounds of flexibility. Read another way, the decision this week to increase tax allowances at a cost of £2.7 billion has removed any room for manoeuvre.

Mr Brown has made the fiscal rules important. They are to ensure sound public finances and that spending and taxation are fair within and between generations (so our children do not have to pay for profligacy now); and to support a smooth path for the economy.

The first, golden, rule is that over the economic cycle the Government will borrow only to invest and not to fund current spending. But the timing of the cycle is not fixed and has often been revised by the Treasury. At present there is no end date for the last cycle. So the limit is widely discredited.

The second, sustainable investment rule is clearer: public sector net debt as a proportion of national income “will be held over the economic cycle at a stable and prudent level. Other things being equal, net debt will be maintained below 40 per cent over the economic cycle." This is according to the Treasury’s Red Book in March, which added that this would apply in “each and every year”.

The Tories got very excited when Mr Brown said on Today that the “sustainable investment rule is over the economic cycle”. George Osborne claimed that Mr Brown was “fiddling his own rules to prepare the path for borrowing billions in the run-up to a general election”.

Four hours later Mr Brown offered a clarification that the debt rule should be met every year.

The Treasury forecast in March that there would be headroom only below the ceiling of 0.2 per cent of national income in 2010-11. This is dwarfed by the average forecasting error. By chance, this works out at £2.8 billion. So, in theory, it has been eaten up by the tax cut this week. The Office for National Statistics is expected soon to revise upwards its estimate of past national income, creating some more leeway.

Most economists say that public borrowing should be allowed to rise during a downturn via what are called the automatic stabilisers: not trying to offset a drop in tax receipts caused by the fall in housing and financial market activity, even though it is partly offset by higher oil prices. And the tax cut was as much, if not more, about seeking to soften the impact of higher oil and food prices as compensating the 10p losers.

The deterioration in public finances since 2005 means that Mr Brown is constrained in what he can now do. Even though the 40 per cent limit under the sustainable investment rule may still allow some leeway, it is not large. Too flagrant a disregard for prudence will damage Mr Brown politically, as well as in the City.

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