The UK economy is undergoing a massive course of steroids. The big question for policymakers is how to generate sustainable growth once the medication starts to wear off.

Everyone now recognises that current levels of public borrowing are unsustainable.

The longer politicians fail to grasp the nettle, the greater the risk that interest rates will rise as the economy starts to grow, and the public sector competes with the private sector for funding.

This would mean less investment in jobs and wealth creation. The government must draw up contingency plans to address this.

A failure to do so will have two damaging consequences: first, it would leave all those institutions that rely on public finance in a state of suspended animation; and second, the next government is going to need a mandate for change, and this will require the political parties to set out their stalls unambiguously.

On the credit market side, unless financial market liquidity starts to recover, the banks’ current arrangements for supporting the liquidity of the banking system may have to remain in place for some time.

On the future of the state-owned banks, it may be rational for an individual bank to act quickly to knock is balance sheet back into shape.

But the banking system as a whole should take time to rebuild its profits and balance sheets, so the process does not lead to a sharp contraction in credit. It would be good to have more clarity about policy in this area.

Choosing the moment to squeeze the public finances is going to be extremely difficult. The economy is still too fragile for rapid moves to cut spending or raise taxes. It is vital for the politicians to make credible commitments to get spending under control - well before there is renewed growth.

All the evidence from history is that a focus on expenditure cuts is preferable to tax increases. This will require radical changes in the way our public services are designed and delivered, with a new emphasis on value for money.

There has been an enormous increase in public spending and the number of public sector jobs. Now the emphasis must change. We have to start squeezing more out of all this extra capacity - finding better ways of giving citizens services of the quality and breadth they have a right to expect.

Above all, we need to concentrate on what drives good results.