One of the great claims of the sceptics is that that global temperatures have not risen in this century and that they probably stopped rising in 1995.

Those who believe in man-made global warming, like FoE, either deny this or think it irrelevant over such a relatively short period of time, when the longer-term trend in temperatures is clearly upwards.

I asked them to send me their respective cases and promised I would post them on my blog for your perusal and debate. Both have kindly done so - and here they are.

Let me make a couple of observations before you get stuck in.

Andrew's case comes first. He offers what he describes as a helpful graph but in fact it is over 120 years so it's not exactly clear what's happened between 1995 and now -- except that there's been a lot of fluctuation in annual temperatures (though all at a high level historically).

He rightly says the long-term is clearly up, though that is made to look more dramatic by choosing a left-hand scale in tenths of a degree. Since 1940 the rise in temperatures looks like it's been around only 0.4 degrees.

James case follows: He now says not that there has necessarily been no warming since 1995 but there has been no statistically significant warming.

But, like Andrew, he doesn't give us a detailed breakdown of temperatures since 1995 from a highly-regarded source for us to study.

One final point before you get stuck in. In a sense they are a bit like ships passing in the night, each making their case but not necessarily engaging with the arguments of the other side.

I might need to ask them to respond to each other's postings. But before I do that, over to you. I look forward to your comments.

As I made clear on the programme, I'm not a climate scientist. So I consulted some climate scientists and scientific literature from respected institutions - which I'd also read before going on the programme - in writing this piece.

Below is a very helpful graph that combines four of the world's most authoritative data sets on global, average surface temperature: two from the US, one from the UK and one from Japan.

The data in the graph is important for three reasons.

As Chris Rapley, professor of climate science at UCL put it to me: "No climate scientist ever stated or expected the global average temperature to rise as a smooth curve. If you look back over the data for the last 100 years rather than just cherry-picking a short [in climate terms] period, the fluctuations are very clearly evident. But so is the upward trend, especially of the last 40 years."

Related to this and having seen the Daily Politics on Friday June 22, Bob Ward at the London School of Economics sent me some very useful, basic number crunching from the team at the Grantham Research Institute on Climate Change and the Environment.

The table in the blog shows in statistical terms what the graph above illustrates what Prof. Rapley says: "warming accelerates and slows, but the long-term trend is clearly upwards".

A further complicating factor is that while the long-term trend is clear, part of the explanation for the fluctuations over the short term is that the energy from the sun is stored in different places - the land, the oceans and the atmosphere.

This energy - which is increasing in overall volume due to the enhanced greenhouse effect caused by human emissions of carbon dioxide and other gases - may not show up as increased surface temperature.

Instead it may be transferred into warming of the ocean's interior where it is hidden from the surface temperature data, the melting of ice caps, or accelerated movement of oceans or atmosphere.

A very good explanation of why we should in fact focus broadly on the growing energy imbalance (i.e. too much of the sun's energy being trapped inside the atmosphere) due to a higher concentration of greenhouse gases rather than narrowly on temperature is contained in this blog.

In a nutshell. the simple answer to the question posed on the programme and to the challenge by Andrew Neil is 'no, global warming has not stopped.'

This is why Friends of the Earth is campaigning for more efficient use of energy across our economy and for a major shift to the harnessing of energy from the sun, sea and wind to reduce emissions of carbon dioxide.

While climate change is Friends of the Earth's main reason for campaigning for renewable and efficient energy, there are many other very sound reasons for investing in renewable energy sources too.

For instance, we have an abundance of natural renewable energy sources in and around the UK and more efficient use of energy will save us and our economy money. See our Clean British Energy campaign for more details.

In particular, what we're calling for in the campaign is for the energy bill' s primary purpose to be the virtual elimination of carbon emissions from electricity generation by 2030.

The massive opportunity for the UK is that a shift to renewable, though requiring investment upfront, promises permanent release from high and increasingly expensive future fossil fuel imports in favour of free fuel from the wind, sea and sun.

"No global warming since 1998." There are few things better calculated to annoy a Greenie than this statement - which is why I like to mention it as often as possible.

They hate it even more when you mention that the arch-warmist Professor Phil Jones of the notorious Climatic Research Unit (home of the Climategate scandal) admitted in a BBC interview that there has been "no statistically significant global warming since 1995".

That's why, if you google it, you'll find so many climate activists falling over themselves to rebut what they consider an outrageous and erroneous claim.

They point out, for example, that by "no statistically significant global warming", Prof Jones means that there still has been warming, just not that you'd notice.

They point out that the trend may have been skewed by unusually strong El Nino events. And they argue that, in any case, 15 years is too short a timescale in which to read a significant trend.

Actually I share their frustration with the "no global warming since 1995/1998" claim, though for very different reasons.

As a point scoring device in the sound-bite driven immediacy of a TV studio debate, it's quite useful.

But as a representation of the key issues in the global warming debate it is grossly misleading.

Mr Fallon pointed out that all meetings with ministers were now documented, had at least one official present and were published -- a departure from past practice.

But we knew that. What I wanted to know was if there was a public record of more informal dinners between the prime minister (and other leading Tory ministers) and big donors to the party, say in Downing Street's private quarters or Chequers.

Mr Fallon sort of indicated that this too was public information but, equally, indicated by his replies that he wasn't quite sure. I said that if he could check and point us to the source of this material we'd publish it on our website.

This is not going to happen. It's clear from the lead story in today's Times and from the Today programme's interview with Tory cabinet minister Francis Maude that Mr Cameron is not keen to publish details of who he's dined with privately in his own quarters and at his own expense in Downing Street.

It is equally clear, as Mr Maude admitted, that if you are a big donor to party funds then you expect some access to leading Tories from the PM down. Indeed, the degree of access can be determined by the amount you donate.

So in a strictly literal sense there is cash for access, if not in the crude way suggested by outgoing party treasurer Peter Cruddas, who has had to resign after a Sunday Times sting caught him dangling all sorts of unauthorised goodies in front of a potential (fake) donor.

We will see if the "refusal-to-publish" line can hold. There will be pressure on Mr Cameron to reveal which major donors he has seen, in whatever context and how often.

The Prime Minister's people argue he has a right to a private life. Others argue that, because of accusations of cash for access sunlight should be shone on who bankrolls parties and how often leaders see them.

What would apply to the Tories, of course, should equally apply to Labour and the Lib Dems.

Many years ago, as editor of The Sunday Times, I ran a campaign for all major donations to political parties to be made public. At the time you could donate large sums to a party in secret.

Diners and donors

The Tories were especially adamant that people should have the right to give money in confidence; but in the end the demands for transparency won the day and very few would want to return to secret donations.

We shall see if transparency wins the day a second time when it comes to diners and donors.

Full Disclosure: I dined last July with the PM and his wife in their private Downing Street flat along with two other broadcast journalists and their partners. It was a convivial evening, though I didn't learn very much, and the first time I'd dined with a PM since John Major in 1992.

I had reasonably regular cups of tea with Tony Blair in his early days as PM and saw Gordon Brown a couple of times at the Treasury (but never as PM).

I assumed dinner with the Camerons would be put into the public domain since I think that's what's now meant to happen when ministers meet the press in private.

But if it wasn't, it is now!

1. The tax-free allowance before income tax clicks in will be increased more quickly than the coalition agreement currently envisages, reaching £10,000 in April 2014, a year earlier than planned.

2. The top rate of income tax will be cut from 50p to 45p, but not until April 2013.

The significance of the phasing of these two measures is that it leaves the chancellor's Budget deficit arithmetic largely untouched over the next two years. The tax-free band will increase this April and next in line with current announcements.

Then it will increase twice as fast as currently envisaged in the 2014 Budget to take it to £10,000.

The Budget Red Book will show the fall in the top rate to 45p as revenue neutral (the Office for Budget Responsibility has signed off on this).

The 2011-12 deficit was projected to be £127bn in the November statement but now looks like it will come in lower than that.

Until recently it was thought it could be a lot lower but a late flurry of spending by departments and lower than expected tax receipts (partly because of lower bank bonuses) mean it might only be a few billions less.

The chancellor aims to bank whatever the shortfall and improve on it in 2012 and 2013 so he has the money to pay for the move to the £10,000 threshold in 2014. It will also be paid for out of various clamp downs on tax avoidance he will announce.

Electoral bribe

The move to a new 45p rate is an interim measure but there is no agreement on when it would go to 40p.

The chancellor wanted to go straight to 40p in return for a variation of the mansion tax and the Lib Dems were up for that. But the prime minister did not agree.

The chancellor would still like to go to 40p in 2014 when the first £10,000 of income becomes tax free. But the Lib Dems are insisting on some other tax on the rich as a quid pro quo.

The agreement to move to a £10,000 threshold in 2014 rather than 2015 (as the coalition agreement currently envisages) was seen by both sides as good politics: to get the money into people's pockets a year before the election was seen as better than a tax cut only a month before the next election, when it could easily be dismissed as an electoral bribe.

But later in our Week Ahead segment The Economist's Janan Ganesh described it as the shape of coalition politics to come.

I suspect he could be right.

The crucial part of the Davies-Oakeshott spat came when Davies said he and liked-minded Tories would block Lords Reform in the Commons and Oakeshott shot back: "then you'll fight the next election on the existing boundaries".

There's the rub. Nick Clegg, who has made Lords reform his personal project, knows he has an uphill struggle.

There are plenty of Tory peers opposed to reform and Labour peers are unlikely to be helpful.

Indeed there's even a bunch of 20 or so Lib Dem peers who don't much like reform either.

It's accepted that when it comes to constitutional issues like Lords Reform Messrs Cameron, Clegg and Miliband don't have full control over the peers who take their parties' whips.

But what if Lords reform was to be derailed by a Tory rebellion in the Commons (while Labour MPs sat on their hands)?

Well, that would be another matter for the Lib Dems. They think they have a deal with the Tories: help us with Lords reform and we'll back the boundary changes which will cut the number of Commons seats by 50 (with Labour and Lib Dems losers and the Tories gainers).

Hence yesterday's Oakeshott threat to the Tories: renege on Lords reform and you can kiss goodbye to the boundary changes.

Put aside the idea that many Tory MPs thought they'd agreed to the AV referendum in return for the boundary changes.

And the other thought that, for personal reasons, a number of Tory MPs aren't that keen on the boundary changes anyway. Both may be true or untrue.

What matters here is that the Cameron high command is pretty sure it has no chance of winning an overall majority at the next election without the boundary changes in place. We're talking big stakes here!

If the PM cannot deliver his own troops for Lords reform and the Lib Dems retaliate by scuppering the boundary changes then that could fracture the coalition beyond repair.

That's by no means certain but it is the fissure around which the coalition will increasingly be divided, as Janan said on Sunday.

Remember it is often the unexpected that rocks politics, including recondite constitutional matters.

The Callaghan Labour government didn't lose a motion of no confidence in 1979 (thereby causing the election it would go on to lose) over the Winter of Discontent, on which the whole country was focused; it was a spat over devolution.

And General DeGaulle was not ousted by the student-worker uprising of 1968.

He had to step down after botched constitutional reforms in 1969. So Lords reform is not just a sideline concern for Westminster wonks.

It could be the issue that rocks the coalition.

Since it's less than two years since Bailout 1 of 110bn euro and things in Greece have gone from bad to worse, you might wonder why this second one will do any better. And you'd not be the only one doing the wondering.

A "strictly confidential" report prepared for eurozone ministers' eyes only but helpfully leaked in this morning' s Financial Times shows that Brussels fears Bailout 3 could be necessary. It warns that Greece is now in a recession so deep that reducing its debt might prove impossible.

At the moment, its cumulative sovereign debt is almost 170% of GDP. Under Bailout 2 it's meant to fall to 120% by 2020 (though nobody seriously expects that to happen). But the leaked brief says it could still be 160% in eight years' time.

The brief also says that forcing private lenders to take a bigger than expected haircut on their loans to Greece (in reality they could end up losing 75% of their loans) is likely to destroy confidence among private investors, making it impossible for Athens to borrow from the financial markets for the foreseeable future.

So it could be on the eurozone drip feed indefinitely.

Two other points that could undermine Bailout 2: it assumes a return to strong growth from 2014 onwards, which might not happen; and the massive privatisation programme that was meant to generate 50bn euro in revenues has been downgraded to 30bn euro - and won't start for five years.

Given eurozone ministers knew all this before they met last night you might wonder why they agreed to Bailout 2.

I suspect it was because, despite all the tough words in the run up to the summit, they didn't want to risk a messy default and thought there was no alternative.

At most Bailout 2 buys some time (like Bail Out 1).

But nobody knows what the eurozone will do with that time (the time Bailout 1 bought has been largely wasted). On present likely projections, even the Brussels bureaucrats think there's every chance there will need to be a Bailout 3.

But if it comes to that I expect the eurozone will finally refuse to write that third cheque. A Greek default has been averted for now. But it could still happen.

My theme was that the Age of Plenty was over and that we were about to move into an era dominated by the Politics of Debt.

This would change the terms of political trade and force politicians on the right, left and centre to rethink almost everything they stood for.

It would mark the end of debt-fuelled capitalism, debt-financed socialism - and debt-drenched consumer spending.

Politicians who wanted to spend more or tax less would no longer be able to do so by borrowing more.

Indeed the priority would be to reduce existing record levels of debt, not just debt incurred by government but the record borrowings of individuals and companies too.

And so it has turned out to be. British politics used to be about more hospitals or lower taxes. Cheaper fuel or better schools. More generous welfare or investment in roads and railways. Or all of the above.

Gordon Brown declared the end of boom and bust and envisaged endlessly rising public spending. The Cameron Tories largely agreed, with only a few wrinkles on how to "share the proceeds of growth" (the possibility of no growth was not considered).

As Labour presided over an unprecedented rise in public spending, the Liberal Democrats called for even more.

Those days are well and truly over, even if it has not yet dawned on all politicians. There is, for now, no (or precious little) growth to share.

Public spending is no longer a bottomless well. Further borrowing is seriously curtailed by the discipline of the bond markets.

All mainstream politicians agree that they must cut borrowing in the medium-term then begin the painful long-term reduction in accumulated national debt. Individuals and companies are doing the same.

When journalists talk about bond markets eyes can glaze over.

So let me simplify it: the politicians have run out of money to splash around. They could tax the rich a bit more but that produces modest extra revenues and is subject to the law of diminishing returns. The vast majority of folk feel taxed to the hilt already.

More borrowing - the default position of recent years - is seriously curtailed by the fact we are already heading for a national debt of £1.5 trillion.

There is no new money in this Age of Austerity. Those who sought our votes in the 2010 general election sort of admitted this in the campaign but for the most part were in denial.

They recognised there would have to be a squeeze on spending but, despite the efforts of interviewers like myself, refused to spell out the extent or nature of the cuts.

I suspect that is why voters ended up trusting no party with an overall majority.

Even as the coalition sharpened its axe to take a swipe at spending and borrowing, the idea was to endure a few years of pain before normal play was resumed, in good time for the 2015 election, when voters could get back to the traditional task of deciding which party's goody bag was the most appealing.

Last November's mini-Budget put the kibosh on that. The outlook for tax, spending, borrowing and growth is pretty grim for the foreseeable future.

Even the coalition now thinks it will not get the public finances into respectable order before 2017. If the eurozone crisis is not resolved soon it could be much longer than that.

Some are now talking openly of a Lost Decade, much like Japan's lost years after its great property crash at the end of the 1980s.

Professional pessimists will no doubt point out that Japan has now endured two lost decades.

We do not know what is in store for us. But it is clear we have passed a watershed and that the Politics of Debt challenges our politicians to abandon their traditional discourse and replace it with something more relevant and realistic.

It is a bad time for our wallets and purses - but a good time to be launching a new political programme.

We are in uncharted territory and the responsibility to hold to account those who rule and those who seek to rule has never been greater. The old verities, after all, are largely a busted flush.

The Sunday Politics launches on 15 January on BBC1. The centrepiece of the show will be an extended interview with a senior politician.

The aim will be to be fair but forensic - to test what they have to say against the new rigours of the Politics of Debt. I hope you will join me.

The latest plan to handle the eurozone's sovereign debt crisis did not emerge until the wee small hours of this morning and it gives us little more than the architecture of what has been agreed.

The building blocks are still missing. Even when they are put in place, many will regard them as inadequate.

The last part of the deal was the banks' "voluntary" agreement to take a 50% hit on their Greek debt. I put voluntary in quotes because, in the words of the Luxembourg Prime Minister Juncker, the banks were told by President Sarkozy and Chancellor Merkel that if they didn't agree they would face a "scenario of the total insolvency of Greece", which would bankrupt many banks.

So it wasn't voluntary: the banks were made an offer they couldn't refuse. Some bank shareholders might yet want to challenge this in the courts.

And 50% might not be enough. The Germans wanted 60%, the IMF thought 75% of Greek debt had to be wiped out to make Greece solvent.

Even with the 50% haircut Greek debt will still be 120% of its GDP by 2020, which is huge. Greece is currently in hock to the tune of 350bn euros. But only 210bn euros is in private (ie bank) hands. The remainder is with official creditors like the IMF and ECB, and they don't do haircuts.

So the 50% write-off only applies to the 210bn euros. Hence the call for more than 50%.

With the 50% haircut agreed (for now) the eurozone was able to confirm its 109bn euros recapitalisation of the banks, which we all knew about already. Again, many think it not enough: City commentators wanted closer to 200bn euros.

The recapitalisation is meant to fill the hole on banks' balance sheets left by the 50% write down of Greek debt. The Greeks will need 30bn euros (taking their latest bail out from just over 100bn euros agreed in July to 130bn euros now), Spanish banks 26bn euros , Italian 15bn euros, France 9bn euros , Germany 5bn euros and Portugal 5bn euros or more.

The deal doesn't say where this money will come from but implies banks should try first to raise the money themselves, then seek help from their governments with Europe as a last resort.

Given the state of the Greek, Italian and Spanish banks and their national governments it's a fair bet Europe will have to be their first port of call. The only good news is that Britain's banks are deemed to have adequate capital.

The third and most opaque part of the eurozone deal is the plan to increase the financial firepower of the 440bn euros bail out fund, known as the EFSF.

The first problem is that it's already down to 250bn euros , the rest having already been committed to bailing out Greece and elsewhere. The plan is to leverage that 250bn euros to 1 trillion euros or more. The markets wanted 2 trillion euros of "shock and awe" if contagion was to be avoided.

The EFSF will attempt leverage in two ways: by using the fund to offer financial guarantees on the first 20 or 30% of any new Spanish or Italian bonds in the event of a default.

This is designed to increase confidence in Italian and Spanish government debt and reduce its cost by lowering the yields they have to pay; and, second, by creating special purpose investment vehicles (Spivs!) seeded with EFSF money but topped up by cash-rich emerging markets like China, which would also buy European sovereign debt.

Suffice to say at this stage that the technicalities of this leveraging have a long way to go, as has the willingness of countries like China.

One final financial part of the deal which has not been much noticed is a eurozone plan to provide guarantees on new debt issued by banks.

They've found it hard to borrow in the current climate and the aim is to end the drought in the market for bank bonds. If this ever gets off the ground it could prove more important than the recapitalisation scheme because it would improve the liquidity of the whole banking system.

For Britain, which played only a walk on part in formulating this deal, the hope is that it will stop the eurozone tilting into recession, which would drag us with it. But there is an enormous political consequence too.

The Germans, who are bank rolling the deal, have made it clear that in return they want speedier move towards fiscal union and more central control of eurozone economies, including tougher scrutiny of national budgets, integration of tax systems and a new framework for running the eurozone, which means structures for the 17 which will rival those for the EU 27.

This inevitably means a new relationship between those inside and outside the eurozone.

Looks like Europe is going to stay at the centre of British politics for the foreseeable future, which is not necessarily good news for Mr Cameron or the coalition.

David Cameron has imposed a three-line whip to vote it down and brought forward the debate from Thursday to Monday so he and the Foreign Secretary can be there (they will be abroad on Thursday).

Many Tory MPs don't understand why the PM has decided to make the vote a show of strength.

After all, they say, the debate will be about a referendum which doesn't just offer a choice of in or out of the EU but a third choice involving staying in but with a substantial repatriation of powers back to Westminster, which is the policy on which the Tories fought the last election.

But Mr Cameron is making a show of strength and there are plenty on the Tory backbenchers willing to challenge it.

Vital national interest

Almost 50 have signed a motion backed a three-way choice referendum, including such luminaries as David Davis, Graham Brady (the backbenchers' shop steward) and Zac Goldsmith.

Mr Brady says many Tories are in such despair about the EU that they want to get out and that "radical reform" is now "a vital national interest". Clearly the Tory whips are in for a tough weekend.

There is mounting eurosceptic sentiment on the Tory backbenchers, particularly among the new intake of 2010.

The PM will likely offer some compromising words - restating his support for repatriation of powers and hinting at a referendum on a new relationship with the EU in the next Parliament. But that is unlikely to sway the rebels.

They think there's never been a better time for a referendum than now.

They are encouraged in that by the government's own policy towards the EU, which is to urge the eurozone to meet its current crisis with a deeper and broader fiscal union.

Absolutely crazy

The eurosceptics argue that if the 17 members of the eurozone follow this advice and form a united bloc then the whole dynamic of the EU would change: the 17 members would largely vote together - and always have enough votes to out-vote Britain.

Hence the growing clamour on the Tory backbenchers for repatriation to accompany any solidifying of the Eurozone bloc. Boris Johnson has already called the Cameron/Osborne policy of greater Eurozone fiscal integration as "absolutely crazy" because it would weaken Britain's position within the EU.

Monday's vote will probably come to not very much but the issue will not go away.

The continuing eurozone sovereign debt crisis is fuelling euroscepticism on the Labour and the Tory backbenchers.

The Tory mood is already being described as "bloody mutinous" and if eurozone leaders cannot come up with convincing solutions at the EU summit this weekend so that a comprehensive plan is in place for the G20 in Cannes on 3/4 November (see my previous blog on this crucial countdown) then calls for a fundamental reappraisal of Britain's relationship with the EU will only get louder.

Signs of an agreement are not encouraging. President Sarkozy had to fly to Berlin for more talks last night, even as his baby daughter was being born.

I'm told there is still no agreement on how to increase the clout of the eurozone bail out fund, the EFSF, which has 440bn euros at its disposal (much of it already committed to Portugal, Ireland and Greece) but is generally thought to need closer to 2 trillion euros to convince the bond markets that it's serious.

There isn't agreement either on how those banks vulnerable to sovereign debt defaults should be recapitalised or how big a default Greece and others should be forced to undergo.

The Germans are already warning not to expect anything very dramatic or comprehensive from this weekend's EU summit - in which case the G20 will be staring failure in the face, a prospect that will infuriate President Obama as well as our own PM.

But if eurozone leaders cannot convince the markets that they have a credible plan then the markets are likely to take matters into their own hand - specifically the wholesale money markets (where banks lend to each other) could freeze because of fears about the solvency of financial institutions (why lend to one if you think it might be broke) which would provoke a banking crisis and a financial meltdown potentially bigger than the one in autumn 2008.

The stakes couldn't be higher, which is why all eyes will be on Brussels this weekend.

The big power companies say they've had to hike our gas and electricity bills because of rising global energy prices. I've been looking at energy prices and I'm not sure the picture is quite as they say.

Broadly, wholesale gas and electricity prices have moved in tandem. The wholesale price (what the energy companies pay) of both shot up in 2008 to a new peak.

Retail prices (what we pay in our fuel bills) quickly followed, also to a new peak.

But wholesale prices fell back from the end of 2008 and continued to fall throughout 2009 roughly to previous levels before the 2008 spike.

Retail prices dipped a little too but still remained well above the level they were at before the spike. In other words retail prices followed wholesale prices on the way up -- but not on the way down.

Wholesale prices started rising again through 2010 and into 2011. But only modestly. Today they are still well below their 2008 peak.

But retail prices have risen again and are now above their 2008 peak. Despite lower wholesale prices compared with three years ago our fuel bills are higher than three years ago.

So, contrary to the Energy Secretary's position, higher fossil fuel prices cannot explain our current very high energy bills. And, contrary to the energy companies, they are not merely passing on the extra wholesale costs of energy.

Two further thoughts. It is clear that the energy market is not functioning like a proper competitive market, otherwise retail prices would not just go up in line with wholesale prices but come down too.

And maybe the Huhne green agenda, involving huge subsidies to wind generation, which end up on all our fuel bills, is much larger than we've been told.

The CPI, the government's preferred measure, hit 5.2% (well up on August's 4.5%) while the more broadly-based RPI (which better reflects household spending patterns) shot up to 5.6% (from 5.2% in August), the highest for 20 years.

You can see why the government switched the up-rating of welfare benefits to the lower CPI!

Fuel bills are up 8.6% year on year, a major contributor to overall inflation and the severe squeeze on living standards.

Inflation will stay at these levels for the rest of the year and might even creep up further. The Bank of England maintains that it will then start to fall from early 2012.

This is likely: the rise in VAT to 20% in January will slip out of the annual comparison in three months time; continued weak consumer spending will encourage price discounting in the dog days of the new year; and weak global growth will put further downward pressure on commodity prices, including energy.

Just how fast and how much inflation will fall in 2012 is another matter - and the current high levels continue to damage the economy.

The main impact of high inflation at a time of low or zero pay rises is further to intensify the squeeze on living standards.

Anaemic growth

When people feel their pay is not keeping pace with prices (and worry about losing their job) they tighten their belts and reduce spending.

This, in turn, reduces economic growth (consumer spending accounts for almost 70% of GDP).

So growth is likely to be anaemic for the rest of the year and well into 2012. The squeeze on living standards will ease a little when inflation starts to fall next year but most families will just be treading water: pay rises will barely match the lower inflation levels.

That's why growth in 2012 is projected to be modest too.

His Washington counterpart, US Treasury Secretary Tim Geithner, has warned that unless the eurozone sorts its problems out pronto the world faces "cascading default, bank runs and catastrophic risk."

Whether we are all heading for the knackers' yard or with one bound will be free will be determined over the next three weeks - 21 days that will determine the future of the world. So that's worth a countdown.

G20 finance ministers met in Paris this weekend. They left with eurozone ministers promising to come up with a comprehensive plan to recapitalise eurozone banks, resolve the Greek debt crisis and increase bail out funds in time for the EU summit next Sunday (2 October). The G20 was encouraged by this promise - but it's a tall and expensive order.

The recapitalising of the banks, to keep them solvent in anticipation of a sovereign debt write-down, will cost around £200bn. Some of that will be raised by the banks from private investors, more from national governments and a large chunk from the EU.

The banks need to recapitalise because they've got so much sovereign debt on their balance sheets that they've loaned to countries who will not be able to pay it all back.

The eurozone will at last accept the inevitable that Greece cannot repay all its debt and accept a Greek default of at least 50% and maybe even as much as 70% (which would be more realistic).

The French will try to fudge what is happening - but it will amount to a default. What is not clear is whether the plan will also get Portuguese (and even Irish) creditors to take a haircut too.

The eurozone has always shied away from the inevitable Greek default because of fear of contagion.

The third part of the rescue plan: a bail out fund of £2 trillion or more to help with the recapitalisation and to keep the bond and money markets liquid so that banks continue to lend to each other despite the financial turmoil.

The European Financial Stability Fund (EFSF) already has almost £500bn at its disposal. The trick is to leverage that to £2 trillion without the German taxpayers thinking they are up for an even bigger bail out bill. A big trick.

The eurozone is supposed to agree all this in time for the EU summit next weekend, when all Europe's leaders will be there. If it does, the G20 is indicating that the IMF will step up to the crease with increased financial firepower of its own.

The EU summit is meant to endorse it all in time for the G20 summit in Cannes on 3/4 November.

Chancellor Osborne told me at the Tory conference that the G20 summit was the end game for the eurozone sovereign debt crisis: there had to be a credible plan on the table by then or the markets would take matters into their own hands.

By that, I take him to mean that the wholesale money markets would dry up, financial institutions would stop lending to each other (because they doubted their solvency) and a liquidity crisis would produce the mother of all banking crisis, throwing Europe and the US into a deep recession, as they struggle to emerge from the last one.

Big stakes indeed. Frankly, for the next three weeks it's the only story that matters.

The precarious state of the UK economy to weather such a crisis is illustrated by the latest forecast from Ernst & Young (E&Y), which uses the same computer model of the economy as the Treasury.

It's predicting less than 1% growth for this year and only 1.5% for 2012. Even by 2013 it thinks the economy will only manage 2.5%. E&Y says it's surprised by the weakness of business investment and exports. But if they are weak at a time when consumers are tightening their belts and the government is cutting spending (in real terms) then it's hard to see where growth could come from.

Growth that anaemic has two clear consequences: unemployment will continue to rise and public borrowing will be much higher than the government assumes in its deficit reduction plans.

So you can see how the UK economy is in no position to withstand a eurozone firestorm, which is why the coalition sees the sovereign debt crisis as by far the biggest threat to the country's well-being.

So fasten your seat belts. We are in for a rollercoaster ride in the coming three weeks.

Between June 2009, when the US recession officially ended, and June 2011, inflation-adjusted median household income fell 6.7%, to $49,909, according to a study by two former Census Bureau officials.

During the recession - from December 2007 to June 2009 - household income fell 3.2%. Taken together, US median incomes have fallen by almost 10% from the start of the recession four years ago, a huge fall which those who wrote the study describe as "a significant reduction in the American standard of living."

It is also a vivid illustration of a phenomenon I've mentioned on the Daily Politics: that for most folk, the recovery is turning out to be worse than the recession!

Belts are being tightened on this side of the Atlantic too. Falling incomes in this country will mean the biggest drop for middle-income British families since the 1970s - and will push 600,000 more children into poverty, says a report from the Institute for Fiscal Studies (IFS).

The IFS forecasts two years "dominated by a large decline" in incomes. As a result, by 2013 there will be 3.1 million children in poverty in the UK, according to the IFS projections.

The IFS figures are yet another example of the tough times for people in the "squeezed middle" - with median incomes falling by 7%, says the IFS, after inflation has been taken into account, the sharpest drop in 35 years.

So times are tough for those on middle incomes and below in America and the UK.

On top of the economic distress this causes families struggling to make ends meet on falling real incomes, there is the wider economic consequence: when incomes fall and borrowing is no longer an option, people curb their spending - and with consumer spending accounting for almost 70% of our GDP, when people cut spending the economy stops growing.

The squeeze on middle and below-middle incomes is probably the single biggest reason why both the US and UK economies are flat-lining, with growth forecasts for both being consistently downgraded.

The bad news is that the squeeze is far from over. Most families are preparing this winter to tighten that belt another notch.

The Tory promise in the election to ring-fence health spending and increase it in real terms every year even during a period of public spending cuts was distinctive and much-touted during the 2010 election campaign.

A quick recap: during my extended interview with Health Secretary Andrew Lansley which went out live on the BBC News Channel on Sunday evening, I suggested that higher inflation than anticipated when the health spending promise was given would make it more difficult to meet the Tory promise of real annual rises.

Indeed I put to him a projection for real health spending which showed it would decline. Mr Lansley disputed these figures and said that, because of an earlier underspend, health spending would still rise in real terms despite the higher inflation.

I said I would post my figures on this blog, which I duly did. And I invited the Department of Health to respond, which it has.

As a consequence of this process I have a clearer idea of what is happening. The Department is right that an underspend in 2010 helps health spending to rise in real terms through to 2015.

But it is important to understand what happened: the 2010-11underspend happened during the coalition's first year. It meant there was a 0.9% fall in spending, in real terms, compared with 2009-10, Labour's last year.

Using this new lower spending base for 2010-11 and applying the official Treasury deflators, spending will be back just above the 2009-10 level in 2014-15 - but by only a 0.1% real increase.

'Essentially static'

In other words, even allowing for the underspend and using the existing deflator, spending will be, effectively, no more than it was in Labour's last year in real terms.

But the official Treasury deflator does not take into account the recent surge in inflation.

Using the average of the independent forecasts for the deflator which the Treasury published in August, health spending will fall by 0.8% in real terms between 2009-10 and 2014-15. The cut is masked starting from the lower baseline of 2010-11.

So there we have it. Comparing Labour's last year (2009-10) with the coalition's last year (2014-15) before the next election, health spending will be essentially static in real terms, using the Treasury's original GDP deflator.

Using a newer deflator that takes into account the reality of recent higher inflation, and real spending on health falls by almost 1%. Either way, it is hard for Mr Lansley to claim that he is keeping his promise.

But these are complicated matters and, as always, I stand ready to be corrected.

You can see my efforts to learn more from Treasury Minister Justine Greening here.

Since that interview I've learned that the Treasury would only buy the corporate bonds of big companies in another financial crisis (at the moment big companies are flush with cash and don't need state help on borrowing) and that the real breakthrough would come from developing a corporate bond market for small and medium sized companies (the SME sector).

The Treasury would encourage SMEs to issue bonds (as an alternative to scarce bank loans) by promising to but them up itself with borrowed money. It would not buy the bonds of companies deemed not creditworthy.

The bonds would have to be approved by credit rating agencies (that really worked with sub-prime!). The scheme would probably not touch the very small (where credit is scarcest).

The bonds would probably be aggregated into new financial instruments to give scale to this new bond market (let us hope they are not then sliced and diced, like sub-prime).

And it won't happen overnight: Treasury briefings talk of months if not years to establish this SME bond market, so the plan doesn't amount to an immediate monetary stimulus.

The Treasury would have to borrow the money to but these bonds but they would appear as assets on the government balance sheet so (it is claimed) not add to government borrowing (I'd like clarification on that: if I borrow £500,000 to but a house secured by the house I've still added £500,000 to my borrowings).

Concentration on this however has obscured another interesting part of the Chancellor's Speech.

At the Lib Dem conference Energy Secretary Chris Huhne denied to me in a BBC interview (and then to the conference) that the various green measures of which he is an enthusiast was helping drive up energy bills.

Indeed he claimed that his various energy-saving measures would actually cut bills over time. That is clearly not the Chancellor's view.

Mr Osborne acknowledged that green policies were "piling costs on the energy bills of households and companies". He went on to say that Britain should not be cutting carbon emissions any faster than the rest of the EU. At the moment we are trying to meet tougher targets than any other major European economy.

The Chancellor said he'd made it clear that the current energy review should reign in Britain's position as a green outlier.

I didn't get the impression at the Lib Dem conference that Mr Huhne's heart was in that. He seemed quite proud of the idea of Britain leading the green field.

I know from private briefings that the Chancellor does not quite share Mr Huhne's green enthusiasm. Mr Osborne wants more realistic targets. Mr Huhne wants to be a pathfinder. Who will win? Watch this space.

* The Andrew Neil Interview with Andrew Lansley is on BBC iPlayer. (until Sunday).

I suggested to him that, because inflation was much higher than had been anticipated 18 months ago, his election promise to ring-fence health spending to ensure a modest real rise in spending (ie an increase after allowing for inflation) every year, was in jeopardy.

He insisted that health spending would still rise in real terms every year throughout this parliament.

In August, the Treasury published the latest City consensus figures for what is known as the GDP deflator, the measure of inflation that is used to determine if any rise in public spending is a "real" rise ie more than inflation.

The GDP deflator is higher now than it was when the Tories made their health spending promise.

Applying the latest estimates of the GDP deflator to projected health spending, I presented Mr Lansley with the following figures:

Health spending for financial year

Based on the latest GDP deflator the best you could say about health spending is that it will be flat in real terms during the current Parliament - to be more accurate it will fall £1bn in real terms. The health secretary did not accept these calculations, and maintained that health spending would continue to rise in real terms every year.

I said we would post our figures and await his comments. Which is what I've just done!

'Better light'

PS: The GDP inflator is quite a low measure of inflation. If we'd applied the RPI to health spending, which many might think a more accurate guide to rising prices in health, then the fall in real health spending would be much more dramatic than the figures about.

PPS: I also tackled the health secretary on waiting lists. I suggested that his own department's figures showed a 20% rise in those waiting over 18 weeks for hospital treatment (up from 316,000 during last 15 months of Labour v 380,000 during first 15 months of the Tories); that those waiting over four hours in A&E during a similar period was up 73% (from 393,000 to 679,000); and the number waiting over six weeks for tests, including cancer tests, was up 186% in 12 months (3,755 in July 2010 v 10,734 in 2011).

He replied by quoting different measures showing his performance in a better light. I'm not sure if that means the figures I put to him are wrong or right: eg does he accept that more people are waiting more than 18 weeks for hospital treatment than before?

Perhaps his officials could enlighten us about that when they tackle the GDP deflator issue.

* The Andrew Neil Interview with Andrew Lansley is on BBC iPlayer.

UPDATE: I heard later on Monday from the Department of Health, and this was the statement from a spokesman:

"An increased GDP deflator has obvious implications for planned spending. However, because the baseline figure for 2010/11 turned out to be lower than planned, we are still on course to deliver a real terms increase over the life of this Parliament.

"This is a commitment that this Government is determined to meet, and it will be met."

That's true of all party conferences but we're in Liverpool with Labour so let's look at some examples from here.

Ed Miliband used yesterday's keynote speech to divide British companies into good and bad or "predator" and "producer".

But I couldn't get any Labour spokesmen to give me examples of either.

Mr Miliband singled out Southern Cross as a baddie, a private equity company that presided over the bankruptcy of old folks' homes and a business track record to be ashamed of.

Since Labour sometimes speaks as if private equity is synonymous with asset-stripping perhaps it is filing private equity under bad. But the AA, RAC, Boots, United Biscuits (McVities, Jacob's Cream Crackers) and several other household companies are all owned by private equity - and few would regard them as bad.

The Labour leader also singled out John Rose, the former boss of Rolls Royce, as the best of British presiding over a good, producer company.

But Sir John has just joined Rothschild's, a City banker that specialises in mergers and acquisitions - and M&As can sometimes involve asset stripping. So do we now remove him from the good file and stick him in the bad?

Then there was the party's new poster boy, 16-year-old Rory Weal who wowed the conference with his tale of being one step away from destitution only to be saved by the welfare state.

His family did indeed fall on hard times but it was from a pretty wealthy base (a £2m+ house).

This is no tale of grinding working class poverty - which meant this nice middle class lad was soon living in a decent house in Kent again (he had to move from private school to grammar school - which not everybody will regard as a sacrifice).

As an example of words that don't last the day, never mind the week, let me finish with Ivan Lewis.

Labour's Culture secretary called yesterday for a register of journalists, from which they be struck off for bad behaviour.

This caused a huge backlash with media from the left and right attacking the idea of journalists working under licence. By early evening the party had quietly ditched the whole idea.

Soon we'll be out of Liverpool and on to Manchester, where no doubt the Tories will erect a similar Potemkin Village.

I'll tell you the truth of what's behind it when I get there.

In the course of our usual robust exchange, which we both enjoy, he made a couple of claims that I knew I would have to investigate more thoroughly. And I have!

I asked Mr Balls to clarify that, among his various apologies, he was NOT apologising for spending too much in good years, instead of running up surpluses which could have been used in the bad years. He made it clear he was not apologising for that because he didn't think Labour had spent too much.

1. He claimed that the National Debt was lower on the brink of the banking crisis in 2008 than it had been in 1997, when they took over from the Tories. That is true in terms of national debt as a proportion of GDP. Public Sector Net Debt was 40.6% in 1997-8 and 36.5% in 2007-8. It shot up to 43% in 2008-9 (and has been rising ever since) but by then the banking crisis was underway. However in absolute terms, debt grew strongly under Labour, from £482bn in 1997 to £567bn in 2007-8, despite 10 years of solid growth when Keynsian economics suggest you should run surpluses. Mr Balls claimed in his speech that "we went into the [financial crisis] with lower national debt than we inherited in 1997." That is true as a percentage of GDP. But not in terms of total debt, which rose £85bn during the decade after Labour came to power. Mr Balls claims Labour was not "profligate with public money". Critics say he should have used more of the revenues to put away for the bad times instead of adding to debt even in boom. You decide.

2. I pointed out that even as a share of GDP debt would have been higher in 2007 than 1997 if he include such off budget items as the Private Finance Initiative, which provides public goods like schools and hospitals but whose obligations do not show up on the public accounts. Mr Balls replied that PFI was on the public balance sheet by 2008. That is untrue. PFI was not on the balance sheet then, something which the Tories criticised. PFI is still not on the balance sheet in 2011, 18 months into a Tory-led Coalition. In 2008 the Institute for Fiscal Studies estimated PFI liabilities at £110bn. Include that in the calculations and even as a percentage of GDP, Labour was borrowing a lot more in 2007 than in 1997 (when PFI liabilities were small).

3. Mr Balls also claimed that Labour had run surpluses in some good years. That is true, but only for one year, 2000-1, when revenues were £18.3bn. In every other year of growth, Labour ran a deficit. I suspect, though I've still to check, Labour ran a surplus in 2000-1 thanks to the sale of 3G licences, which raised £22bn and Gordon Brown used to reduced national debt.

PS Mr Balls is now promising to use any net proceeds from the sale of the banks back to the private sector to pay down the national debt.

But the Office of Budget Responsibility calculates that the net gain from such a sale is likely to be only around £3.5bn. By 2015 (the earliest Labour is likely to see power again) the national debt will be around £1.4 TRILLION. A reduction of circa £3.5bn would be de minimus.

Last year the Business Secretary played to the Lib Dem gallery with a populist speech that depicted capitalism as brutal and dismissed bankers as "spivs and gamblers".

We expected more of the same this year, but we didn't get it. There were a few more swipes at bankers and society's inequalities but it didn't sound as if his heart was in it.

His much-trailed plans to curb executive pay failed to live up to their billing: it amounted to no more than consultation and getting the former boss of Rolls-Royce to investigate. Nothing very radical is likely to come of that and Lib Dem activists regarded it all as a bit of a damp squib.

The Cable speech was notable nevertheless, for its grim assessment of our current economy predicament.

He said we were in the "economic equivalent of war", in which the US economy had "stalled" and the condition of the Eurozone was "dire". As for Britain, he saw no respite in the foreseeable future.

He could offer no "sunny uplands", he said, only "grey skies".

You can regard all this as laying it on a bit thick - nobody ever mistook Mr Cable for a ray of sunshine - or unvarnished economic realism.

But if he's right the political consequences for the Lib Dems have yet to dawn here in Birmingham.

The hope was always to get the pain out of the way and hit the next election with the deficit tamed, a growing economy and rising living standards.

But if the economy really is in the tank, as Mr Cable says, then even with an election still four years away the coalition could already be running out of time to reach the sunny uplands by 2015.

If it's grey skies for the foreseeable future the Lib Dems poll ratings, currently languishing at 11%, are unlikely to improve.

Indeed you wouldn't rule out them getting worse. But nobody here in Birmingham, where the Lib Dems are in quite a chipper mood, wants to contemplate that.

But matters did not go from bad to worse for him during the summer and he has arrived here in relatively good shape. His position, for now, is secure.

But his poll ratings are dire. Only 24% in a new poll find the Lib Dems 'credible' in government. Only one in five think Mr Clegg a good leader.

The great concern in Birmingham is that the the Lib Dems have been irretrievably tainted by association with the Tories.

So the plan is to distance themselves. Hence bash a Tory is the conference's most popular sport.

Whether it reestablishes the Lib Dems is another matter. Voters might wonder why, if you hate the Tories that much, you're in coalition with them.

'Never prepared'

At heart, the Lib Dem activists simply don't like being in alliance with the Tories.

They might buy, reluctantly, that they had to form a coalition in the national interest.

But at conferences in years gone by the party leadership never prepared the the party for ever being in bed with the Tories.

Indeed, they regularly placed the party to the left of New Leader, making any arrangement with the Tories incredible.

But it's happened and as a result, despite the consolations of power, this conference is not a very happy place.

Andrew Neil is presenting the Politics Show and Daily Politics , plus The Andrew Neil Interview and Today at Conference from the Liberal Democrat conference in Birmingham.

After asking if he still regarded Syria's President Assad as a "breath of fresh air" I moved on to ask about the veracity of an incredible exchange he'd had on the London-based Iranian-run Press TV, where he works.

During an interview with the leader of the Iranian regime, President Mahmoud Ahmadinejad, GG declared he required "police protection in London from the Iranian opposition because of my support for your election campaign. I mention this so you know where I'm coming from."

I suggested this was quite a remarkable thing for a supposedly independent interviewer to say and inquired if it was really true.

He kind of implied that it wasn't, without quite going that far. So here's the interview. You can make up your own minds by scrolling through to 13 mins 57 seconds on this clip.

GG retorted at one stage that I should not criticise Press TV, which many see as an Iranian propaganda channel because I once worked for Fox News, which is widely seen as an outlet for the Republican Right.

I didn't take the bait because I suspected it was designed to sideline me from the issue of his attitudes towards Syria and Iran (and before that Iraq).

But for the record I have never worked for the 24-hour Fox News Channel.

In 1994, before Fox News existed, I went to New York to begin work on a weekly documentary show for Fox to be based on the world-famous CBS show 60 Minutes. But Fox changed its mind and I was back in London before the year was out.

Fox News, which was launched around two years later, had nothing to do with me and bears no resemblance to the weekly documentary show I had planned.