The Treasury has been a Tony Blair exclusion zone ever since 1997. So something is up when Mr Blair writes a joint foreword with Gordon Brown to a Treasury document: a 148-page paper on long-term challenges facing Britain, only a few days after Downing Street produced a 29-page paper on priorities for the UK, from the Prime Minister’s Strategy Unit.

The something, of course, is the revived public chumminess between the Prime Minister and Chancellor of the Exchequer as they seek to put substance into all the talk about a “stable and orderly” transition.

When Mr Blair first announced the reviews of long-term policy last September, to report by next spring, the Brown camp was sniffy. Their man’s hands could not be tied before he became Prime Minister, and, anyway, the spending review — the first comprehensive one since 1998 — would look at the same issues.

But after delicate talks, and behind-the-scenes finessing by Sir Gus O’Donnell, the Cabinet Secretary, it was agreed that the exercise would be jointly undertaken by Downing Street and the Treasury. The reviews would not lead to a final Blair big-bang policy statement next spring but would “inform” the spending review and ministerial decisions after Mr Blair’s departure.

In part, this reflects the erosion of Mr Blair’s authority, and the hollowing out of his Downing Street operation, which is anyway distracted by the police inquiry into party loans and peerages.

Nonetheless, for all the outward harmony, the implict message yesterday was that we, the Treasury, have done the hard work. The new paper takes account of the contributions of more than a hundred academic and expert commentators (including Polly Toynbee of The Guardian, not just an inspiration for the Tories), and, like an academic paper, has received peer review from ten leading professors.

The paper is a thorough and fascinating analysis, similar in outline to the Strategy Unit’s work. In practice, there is little dispute about the main challenges: the impact of a rising number of older people, increased international competition, greater global demand for resources, terrorism, migration . . . etc. The real questions are about the policy implications: and none will be easy. As the paper says dryly: “Maintaining a consensus behind globalisation and further multilateral liberalism is the key to reaping benefits for the global economy and the UK”.

Tell that to the new Democratic Party leaders of the US Congress and to French presidential candidates.

In particular, the combination of continued population growth, a decline in average household size, and more old people will intensify pressures not only on housing and transport but also on public spending generally.

This is not a paper pointing to a rollback of the State. Of course, technological change makes the possibility of what are called “larger congestion charging schemes more feasible”, hence a more “green” approach to roads and driving. But improving public transport, or funding new and improved health treatments, will be expensive.

However, we already know that public spending in real terms is due to grow by less than 2 per cent a year from 2008 onwards, less than half the average rate since the late 1990s. This implies a very tight constraint if new “challenges”, such as combating terrorism and tackling climate change, are to be accommodated alongside improving health and education.

The Treasury paper is opaque on some of these choices. How much farther should we go down the road of green taxes, as well as charging to pay for higher education and elderly care? Mr Brown’s strong card is that his experience as Chancellor (you know the script) makes him the right man to tackle the long-term challenges facing Britain. If so, he should start spelling out in the Pre-Budget Report a week tomorrow the implications for spending and taxes.

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