Anyone disposed to complain that British politics is ruined by consensus will find plenty to applaud in David Cameron's speech yesterday. Whatever the merits of the case he made, a real argument has now opened up between the two main parties. On the big issue of the day, the route out of recession, there is now a genuine choice. By very circuitous routes, Labour and the Conservatives have arrived back at their original positions on public spending.

The Chancellor has decreed that every feasible infrastructure project should be brought forward. The money flooding into the economy from public works will be supplemented by tax cuts, the scale and nature of which will be announced in the Pre-Budget Report next Monday. The whole package will be financed by increased borrowing, which is likely to reach £60 billion next year. Yesterday David Cameron, in emphatic terms, opposed extra borrowing on the ground that the stock of debt is already too high. And a tax cut today will inexorably lead, as the Prime Minister has conceded, to a tax rise tomorrow. Better, say the Conservatives, to flatten the trajectory of public spending. From 2010 onwards, therefore, they will not pledge to match the Government's spending plans.

This dispute hangs, to a large extent, on whether a fiscal stimulus is likely to work. The Bank of England, the CBI, the European Commission and the IMF are all agreed that the recession in Britain will be more severe than in other countries. Public spending takes a long time to feed through. Private households may conclude that it makes sense to save the money as it is already a rainy day. The precedent of Japan, which tried in vain throughout the 1990s to stimulate the economy through fiscal policy, is hardly auspicious.

But one thing is already clear. The borrowing requirement will be an order of magnitude higher than during the boom years and the money has to be paid back. In the meantime the markets need to retain their confidence that the Government has a strategy for balancing the books. Since the summer, sterling has depreciated sharply. It may lack the drama of a single-day devaluation but the fall is larger than the currency crises of 1967 and 1978, both of which gravely undermined Labour's claim to economic competence.

There are two options and neither is entirely painless: either taxes overall have to rise or the rate of growth of public spending has to fall. The Government, and the Prime Minister in particular, may have too much political capital invested in the virtue of public spending to allow that option. He then would have to raise taxes. In the ancient world before the credit crunch it was already becoming apparent that the electorate was close to the limit of its threshold for being taxed. To assume this appetite has increased is a big gamble. Reducing the rate of growth of public spending is not as easy as it sounds. There are very few claims on public resources for which there is no case at all. This newspaper has long been an advocate of a more extensive reform of public services. But reform almost always loads the cost up front. To close down one system and replace it with another pays off in Year 4 but depletes the balance sheet in Year 1.

And yet the long-term health of the British economy now requires prudence on spending. It is remarkable that, after ten years in which he had a virtual copyright on the term, Gordon Brown should have dismissed prudence with such relish. There was a time, not so long ago, when no Brown answer passed without a discussion of the long term. Now, in defiance of all his own instincts, the Prime Minister is living in the moment. He has taken a major risk. The Opposition has made it plain that it will oppose. The terms of trade are now set.