Dec. 19--Lord Mandelson, the Business and Enterprise Secretary, may be known as the master of spin, but he also tends to tell the unvarnished truth. It is just that his reputation is such that no one expects it, so it gets overlooked. As an example, he was quoted in the Financial Times two weeks before the Pre-Budget Report, talking about how he thought it likely there would be a cut in VAT. But it was tucked away deep on an inside page, so it still came as a surprise to most people on the day.

Now he is at it again. Consider this passage from a lecture -- also largely unreported -- he delivered this week to the Royal Society of Arts, in which he gives an assessment of the outlook for the British economy that is far more blunt and brutal then anything heard from the lips of the Prime Minister or Chancellor Alastair Darling.

Outlining why there was a need for serious new thinking about the role for manufacturing, Mandelson said: "There will be major consequences from the current slowdown for the structure of the UK economy long after growth has resumed. The economy will emerge with a consolidated financial services sector. Household consumption is likely to grow more slowly than the rest of the economy as British consumers cut back on debt. Public-sector job creation will add far fewer jobs to the economy in the future."

So there you have it. The big banks will be much more cumbersome and less innovative than before. Consumers will struggle to pay down their debts for years, which means gloom and bankruptcy on the High Street is likely to be the norm for some time. Unemployment will be a continuing problem as public-spending curbs will put an end to public-sector job creation.

Given that this is what the Government thinks is likely to happen to the economy, that raises an intriguing question that Mandelson unfortunately did not address. If the prospects are as bleak as he says, when is the Prime Minister going to call the election?

'Consumers will struggle to pay down debts for years, which means gloom on the High Street is likely to be the norm'

A CALL TO BE MADE ON XL: XL is the name on everyone's lips in the insurance market. The firm, listed in the US but one of the biggest players in London, was Avis to American Insurance Group's Hertz. Whatever the giant AIG saw fit to do, XL tried to do, too -- and if it could do it more aggressively, so much the better.

But AIG blew itself up insuring credit derivatives, and became subject to the biggest bailout the world has seen -- equity loans and dead money of almost $130 billion handed over by the US Federal Reserve.