A day after Britain unveiled a multi-billion-pound fiscal stimulus package to spend its way out of recession, market analysts have been busy figuring out what it all means, in the context of a sharply slowing economy.

Nick Parsons, head of market strategy at nabCapital, has come to this conclusion:

"People need to spend less, not more, and though little Johnny's Xbox is indeed 4 quid cheaper, his Dad's house is worth £3.97 less every hour,"he wrote in his daily note.

"That’s every hour of every day, 24 hours a day and is not going to get in the slightest bit better as a result of yesterday's budget announcement… Thanks to the VAT reduction, Easter eggs might be 10p cheaper next year but by then average house prices will be another £10,000 cheaper. Go figure."

Newspapers were in no doubt of the significance of the pre-budget report – this was a defining moment in British politics.

New Labour is no more, they announced, and prudence has been blown away by a massive gamble for the hearts and minds of the electorate before the next election.

“The landmark mini-Budget was a pivotal moment which will shape British politics for years ahead,” wrote The Independent. “It presents voters with a stark choice between two very different futures: a European-style social democracy under Labour, in which the better-off pay higher taxes to maintain public services, or a nation of lower taxes and state spending under the Tories.”

The Guardian, in an editorial entitled “Everything Changes,” said Chancellor Alistair Darling had read the last rites for New Labour. “He abandoned, through necessity, the deal Tony Blair and Gordon Brown struck with the electorate a decade ago, that progressive politics could be paid for without overt economic pain.”

“The government,” it said “has found a purpose, which is to tax the rich to help the poor, something it has never dared admit openly before. Old political certainties now lie like timber, uprooted in the storm. An extraordinary history-changing contest has been got underway.”

The Times called it a “Robin Hood style budget” and echoed the theme of Labour returning to its left-wing roots. “When faced with difficult choices in a serious crisis, it has abandoned its new dogmas for old certainties,” the paper wrote. “Opposing the ‘fiscal stimulus’ is perhaps David Cameron’s biggest gamble, given that Britain’s action will be followed by other countries over the next days and weeks.”

Both parties have now hitched their fortunes to the length and depth of the recession, it noted.

The Sun was among the many papers proclaiming the death of New Labour. “In one emergency splurge, a beaming Mr Brown reverted to Old Labour’s natural big government tendency to tax spend and borrow,” it said.

If the gamble fails, Brown will have mortgaged Britain’s future in “an unforgivably reckless budget.”

The Daily Mail called the pre-budget report the most dramatic about-turn in government policy since the 1970s. “Even if the incentives work  -  and there have to be doubts about whether the cut in VAT will trigger spending in our ailing High Streets  -  the truth is that it represents the most monumental gamble by the Chancellor. For it is based on a positively rose-tinted prediction that the economy will start bouncing back by 2010  -  something many experts hugely doubt.”

The Daily Mirror portrayed Brown on its front page as a poker player, holding his cards under the headline “The Gambler.”

“Mr Darling is taking a big chance but the Tories’ do-nothing approach is a non-starter,” it said. “Yesterday was a big moment in post-war politics and the government rose to the challenge.”

Whether the 20 billion pound package of tax cuts and spending stimuli will be enough to see Britain through the next few painful years was a topic of wide debate in the papers but most felt the VAT reduction to 15 from 17.5 percent — a cornerstone of the report — would have little effect.

“The tragedy is that the fiscal stumulus package, led by a small reduction in value added tax, will still fall far short of the desired effect,” wrote the Financial Times. “The UK consumer is now too stunned by the housing crash, stagnant wages and fears of unemployment to be coaxed into resuming the insane credit-fuelled binge of yesteryear.”

Chancellor Alistair Darling has delivered a 20 billion pound fiscal stimulus package to get the nation spending again and mitigate the worst effects of the downturn.

He cut VAT to 15 from 17.5 percent just in time for Christmas shopping – a move he said would put some 12.5 billion pounds in consumers’ pockets over 13 months. Other measures include well-leaked plans to help homeowners, small businesses, parents and pensioners.

But government borrowing will more than double to 78 billion pounds this year and 118 billion next year before starting to come down. Darling says he will bring the public finances back into balance by 2015.

The package now sets in stone the diverging approaches towards the downturn being adopted by the main two parties. Labour is effectively spending its way out of recession, the Conservatives — against the run of most independent economic advice — have opted for caution. Shadow Chancellor George Osborne said the plans amounted to “putting a time bomb,” set to explode in the future, under the nation’s finances.

What do you think? Is this a bold and innovative way to get the economy moving again or a dangerous, debt-fuelled gamble?

David Cameron’s decision to ditch a major Conservative pledge to match Labour spending plans pound for pound was hailed by commentators as an important step in the politics of the recession, opening up a clear gulf between the two main parties’ economic policies but exposing the Tories to considerable risk.

Labour is expected to cut taxes, accelerate public spending and announce more borrowing in Monday’s pre-budget report. Now their supporters can revive the spectre of “Tory cuts” to funding for schools and hospitals which helped the Conservatives lose the last two elections.

For many of the newspapers, this is all part of a game being forced on the Tories by Gordon Brown’s rapid resurgence in the polls thanks to the economic crisis. A Mori poll this week found the once-mighty 26-point Conservative lead has slumped to just three points — equivalent to a Commons majority of four seats.

“In the extraordinary game of chess that is being played out against the backdrop of the recession, Cameron had no choice,” wrote The Independent. “But there are big risks for the Tories. Most non-partisan economists recognise the case for higher borrowing to pay for a fiscal stimulus. The Conservatives are virtually on their own in claiming spending cuts are an immediate answer.

“Spending cuts are also easier to announce than they are to implement, not least when the Conservatives have some ambitious spending programmes of their own. If Cameron comes up with any pain-free cuts, Brown will implement them first, as he did in the run-up to the last election.”

The Guardian said a curiously quiet period in British politics has come to a close with the announcement.

“Over the past few months the economy has been in wartime, beset by a banking crisis and a global recession, while politicians have been unsure how to react. Sure, Gordon Brown got his fill of summit-hopping. But most MPs have been little more than restive spectators of a crisis which will define economic policy for years to come and set the terms of the next election. That all ended yesterday.

“The political battle lines have now been drawn around one key question: who can best manage the recession?”

The Financial Times was in no doubt of the importance of Cameron’s policy tack. “He has taken one of the biggest gambles of his near three-year tenure … bucking the corporate and economic consensus to bet on a fundamental shift in voters’ attitudes in the next election,” it wrote.

“He believes he will be proved right in the long term as the recession deepens and voters increasingly blame Mr Brown for the state of the public finances rather than turn to him as the best hope for economic recovery.”

That may be a good move, the paper added, if the election comes in 2010 but could backfire if, as some commentators are suggesting, Brown decides to go to the country before things get too bad.

Several papers applauded Cameron for opening up a clear choice for voters in how deal with the coming hard times.

“On the big issue of the day, the route out of recession, there is now a genuine choice,” The Times said, while the Daily Mail declared: “With one bold decision, Mr cameron set himself free to offer a meaningful alternative of real substance.”

The Daily Mirror spoke of thick red lines now having been trawn between the two parties and warned the Conservatives  were missing the public mood.

“Every nurse, care worker, soldier and their families now has a vested interest in voting Labour,” it wrote.

But The Sun applauded Cameron’s move. “Labour seems ready to gamble the entire economy on a “cut now, pay tomorrow” burst of tax reductions financed by ever-higher borrowing,” it said. “That is the economics of the madhouse.”

“At last the Tories seem to be finding their voice. They have decided to put hard-working taxpayers first — and dump their daft promise to match Labour’s bloated spending.”

Prime Minister Gordon Brown has suggested he will push expansionary fiscal policies to help boost the economy. Brown’s comments were the latest in a series from him and Chancellor Alistair Darling stressing the importance of boosting the economy, which shrank in the third quarter of 2008 for the first time in 16 years and is expected to contract more sharply next year.

Bank of England Governor Mervyn King has also put his weight behind “some fiscal stimulus”, just as the Bank predicted in its quarterly inflation report that the economy would shrink sharply next year.

But what is the way forward - tax cuts or higher public spending?

The dividing line between Brown and Tory leader David Cameron is whether to borrow to fund tax cuts. Cameron has argued that Britain’s deficit is too high to allow further borrowing. Brown says Cameron’s claim that he can pay for his tax cut by savings on welfare benefits isn’t realistic.

Tax cutting is a populist measure and it may be tempting for Brown, who no longer appears to be married to fiscal prudence, to go down that road, not least because of the backlash he faced earlier this year over scrapping the 10 percent tax band.

But there are a number of reasons why tax cutting may not result in a boost to the economy: government borrowing gets dangerously high and will limit the economy’s ability to recover swiftly from a recession, and people may decide to save rather than spend any extra money they might have in their pocket due to tax cuts.

What’s your view - do you think increased public spending will stoke demand, are tax cuts the way forward to boost the economy or should the government go for a mix of both?