Everyone in Westminster is talking about the C-word. But ministers go to ridiculous lengths to avoid uttering the four-letter noun that dare not speak its name. Yesterday, Lord Mandelson talked about “wise spending, not big spending”, last week Alistair Darling promised lots of “tough choices” and “restraint”. They are like verbal contortionists, getting themselves into ever more uncomfortable positions to avoid stating the obvious — and deliberately so, because they are waiting for Gordon Brown to be the first to say the word: cuts.

Let us hope that the Prime Minister puts his colleagues — and the voters — out of their misery and use the word when he addresses the Trades Union Congress today. Those around him are begging him to. But last night Mr Brown had still not decided whether to come clean and state categorically that there will be c*** in public spending whoever wins the next election.

“It’s like the sorry saga over the word sorry after the MPs’ expenses scandal,” a government aide says. “Gordon now has to lead.”

In his head, the Prime Minister has been persuaded that Labour must be more honest with an electorate that knows public debt is rising to dangerous levels — but in his heart he still clings to his beloved strategy of contrasting “Labour investment” with “Tory cuts”. The danger is that the Government will end up in the worst possible position — admitting that there will have to be spending restraint, without gaining credit for being straight.

For all the talk of dividing lines and “nice cuts” versus “nasty cuts” there is now a consensus among politicians of all parties that it is time to face up to the scale of the problem in the public finances at the next election. It’s the “masochism strategy” turned on its head — at the last election, Tony Blair toured the television studios to soak up the audience’s anger with him. At this one, the politicians will be asking the voters to support policies that will cause them and their families pain. One Labour strategist says: “Honesty is starting to trump populism.”

How far can this approach go? Although the latest Times poll shows that 84 per cent of voters think that public spending cuts are inevitable after the next election, they disagree about where the axe should fall. Will they really vote for a party that proposes cuts to the services, or benefits, they use? As Helmut Kohl, the former German Chancellor, once said: “You don’t win elections by putting the instruments of torture on display.”

The search is on for “victimless” cuts — big projects, such as the replacement for the Trident nuclear submarines, ID cards or the child database. But because their budgets run over many years they will not actually save that much money in the short term. And there is, of course, no such thing as a victimless cut, any more than there is a victimless crime.

Now, politicians are starting to realise that they may have to make the case that individuals will have to suffer. There has been talk of scaling back benefits paid to the middle classes — such as the winter fuel allowance for pensioners and tax credits for parents.

Recently, both Labour and the Conservatives have started to look closely at proposing a freeze on public sector pay after the next election. It would be a brave plan when more than a fifth of the electorate is employed by the State but it could save more than £6 billion a year.

David Cameron has paved the way for an announcement by promising to cut ministerial pay — which would make it easier to propose reductions for others. Perhaps more surprisingly, some senior government figures believe that Labour should face down the trade unions and try to scale back the public wage bill when present three-year agreements expire. The Treasury will shortly submit its evidence to the review bodies that set Civil Service pay. I am told that ministers are determined to emphasise the importance of restraint.

At a time when many in the private sector are having their wages cut there is a growing recognition at the Treasury that it will be hard to justify rises for doctors, nurses and teachers after the election too. As one minister told me: “More than half of public spending goes on pay, so if you really want to make savings you have to look at that.”

Behind the scenes, there is more radical thinking going on about the size and scope of the State in a post-recession world.

The independent Commission on Public Services, set up by the Royal Society for the Arts, will publish its proposals soon after the election and is already attracting interest from both Labour and the Conservatives. It is chaired by Sir Andrew Foster, a former head of the Audit Commission, and its members include Matthew Taylor, a former adviser to Mr Blair, and Stephen Dorrell, the former Tory Health Secretary. According to Ben Lucas, the director, the starting point is that the welfare state, founded by William Beveridge more than 50 years ago, is out of date and needs to be fundamentally redrawn in a way that encourages people to take much more responsibility for themselves.

Proposals under discussion include an unemployment insurance scheme to replace parts of the benefits system, education vouchers and a social insurance policy to fund health care. The delivery should, the Commission believes, be far more local — with community-run parks, regional mayors and personal budgets. The State would take a back seat, underwriting provision rather than managing services. People would have more control — but would also be expected to pull their weight. It would be controversial but it may resonate with voters tired of being treated like children.

Politicians should also start being more open about the limits of government. Mr Brown should admit there will be cuts or he may find himself, like Julius Caesar, facing “the unkindest cut of all”.

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