If this was a turning point, it was remarkably well signposted. The ground had been thoroughly prepared for Gordon Brown's speech at the Trades Union Congress in Liverpool yesterday. An address by the Chancellor last week and various media appearances by the Business Secretary, Lord Mandelson, had indicated a clear change in tone from the Government on public spending. But yesterday's speech by the Prime Minister admitting the need for "cuts" in public spending was an important moment nonetheless.

The Conservatives argue that this reversal represents a vindication of their policy, throughout the economic crisis, of advocating "fiscal responsibility". The Prime Minister, for his part, argues that though cuts are necessary, his party would implement them more humanely than the Conservatives. These, then, are the new rhetorical political battle lines.

Yet the economic situation is more complex than either the Government or the Opposition seem prepared to acknowledge. The Prime Minister yesterday spoke of the need to "cut costs, cut inefficiencies, cut unnecessary spending and cut lower priority budgets". But no one seriously believes that the budget will be balanced merely by reducing waste and increasing public sector productivity. Realistically, entire state programmes will need to be shelved or dismantled. Unless the Government puts more flesh on these plans in its November Pre-Budget report it will lack credibility and the potentially destabilising fears of government bond investors will continue to grow.

Meanwhile, the Tories talk as if the only problem facing the country is "Labour's debt crisis". This only tells half the economic story. The rising deficit is certainly a serious problem and politicians must send strong signals to the markets that they will do what is necessary to bring the deficit down to manageable levels over time. But even more pressing than the deficit is the continued weakness of the overall economy. Without a return to sustained growth, the national debt burden could grow even greater, even with public spending cuts.

A statistical economic recovery is taking place in most countries, almost certainly including Britain. Just about every serious economist credits this to the unprecedented fiscal and monetary rescue measures undertaken by the authorities in the wake of the global collapse in economic confidence a year ago. But what we are witnessing is a bottoming out to the collapse, not a strong private sector-led bounce back.

There is a serious danger that if governments remove the various economic supports that have been put in place now – something the Tories, at times, seem to recommend – the economy will lurch back into crisis. This risk of a double-dip recession is just as real as the risk that debt markets will force up the British state's borrowing costs. Before our politicians take any action to end, for instance, the VAT tax cut or the car scrappage scheme, they need to be very sure that the economy is resilient enough to absorb the consequences. There has been little evidence to suggest that we are yet at that stage.

We should be pleased that the phoney war of "Labour investments versus Tory cuts" is over. But unless the two main parties also face up to the particular deficiencies in their economic policies the next battle promises to be equally synthetic.