Will Hutton puts it as graphically as anyone:
"... 5% of Britain's GDP has disappeared forever. ...This means that the path to sustainable public finances is going to be astonishingly painful. We can live with national debt doubling, but it cannot double again... The problem is that so much economic capacity has permanently disappeared, along with those parts of the economy that used to deliver rich tax revenues; the post-recession economy will only reduce the deficit by a quarter. The rest has got to be found by tax increases or reductions in planned spending....Duncan is patiently explaining to the Labour loyalists the reality of this. I'm not sure this Labour Party will be able to take that much reality - look, even the very clever Hopi resorts immediately to attack dog mode. I think the next election will be fought on the basis of lies, more or less consciously. Neither the Tories nor New Labour will quite be able to admit to this sort of prospect. Who would vote for either of them if they did?
Britain is going to feel very different in the years ahead. .... the pound has suffered a devaluation since 2007 that is bigger than those in 1931, 1949 or 1967. The British economy, in dollar and euro terms, is now emphatically smaller than those of France or Germany, and our new peers are Italy and Spain. ..... Like the empires of Venice, Spain, the Netherlands and Austria before us, Britain no longer has an economy large enough to finance our ambitions and overseas commitments.
The next government, of whatever hue, will surely raise the basic rate of income tax; 22 pence is certain, 25 pence likely. Public sector pay and pension benefits will be frozen or cut. The state pension will not be indexed to earnings growth. The national ID card scheme is dead. We will need a network of public infrastructure banks to finance capital investment, otherwise it will be goodbye to CrossRail and a modernised rail system and any hopes of improving our housing stock. But all this will still be insufficient.
There is no way that Britain's defence, overseas aid and foreign commitments can survive the next decade without swingeing cuts. Trident, the Eurofighter and the planned aircraft carriers must go. A review will cut the defence budget by a third, the aid budget by a similar proportion. Embassies will be shared or sold. Our permanent seat on the UN Security Council will become indefensible. The special relationship will be a joke; Britain will not have the capacity to invade anybody. Suddenly, the European Union will seem a more attractive way of retaining influence.
An urgent debate will begin about how to grow, because unemployment is going to rise by at least another one and half million by 2012 and fall only very slowly thereafter. The Faustian deal New Labour struck with the City cannot be repeated."
The trick for the much derided and usually invisible Left though is rather different. It's time to move from almost ritualised denunciations of bankers , or even denunciations of capitalism in general, and find a way that a meaningful austerity programme can be re-packaged as sustainability. Sadly, I'm not holding my breathe.