The nine men and women who set British monetary policy agree that the next few years for the economy are not going to be much fun. But they don't all agree on what to do.

As the minutes of the November meeting reveal, seven members of the Monetary Policy Committee voted to buy another £25bn-worth of assets over the next three months. But two voted against.

David Miles wanted an expansion of £40bn, to keep the asset sales running at the same pace as before. (It would be £50bn, but quantitative easing was always going to take a breather over Christmas. Presumably the Bank thinks that injections of good cheer from Father Christmas will be more than enough to fill the gap.)

The second "no" vote is the more interesting, since it came from the Bank's chief economist, Spencer Dale, who preferred to leave policy unchanged.

Judging from unattributed comments in the minutes, this was partly because he was worried about the sheer uncertainty about the amount of spare capacity in the economy, and the implications of that for inflation.

But he also thought there was a risk that further injections of cash would result in "unwarranted increases in some asset prices that could prove costly to rectify, complicating the task of meeting the inflation target in future."

This has been a growing concern among policy-makers around the world in recent weeks. I raised it directly with the Governor, Mervyn King, at last week's press conference. He gave a robust response - some might say, surprisingly so. (You'll see he makes a scathing comment about people seeing "bubbles" in every asset price rise, when I had chosen my words rather carefully. Not that I took it personally, or anything...)

Now, perhaps, we have one reason for his giving such a lengthy and forceful reply. He's been having the same debate with his Chief Economist.

Should we be worried about a new asset price bubble? The current answer - at the Federal Reserve and at the Bank - is "no". In fact, I doubt that Spencer Dale thinks it's something that needs to be addressed next week or next month.

The agreed wisdom, elucidated by Mervyn King in his answer to me, is that there are two types of bubble: those driven by sheer investor exuberance, and those driven by exuberance plus shedloads of new credit.

In theory, it's only the credit-fuelled binges you have to worry about, because they bring excess levels of leverage - debt - into the equation. Frederic Mishkin also provided a clear statement of this argument in the FT at the start of last week.

When you or I lose money in the stock market (assuming that most of you aren't hedge fund managers), it's usually going to be through our pension fund or ISA. All that happens is the value of the assets in the fund go down, and we are a bit cross. When you have an asset boom, without a heavy expansion of credit, most investors in the market are like that.

But with a credit boom, more of those assets are going to be held by people or institutions who borrowed to buy them. And if the price goes down, they may have to sell them to service that debt (or pay it back). That will lower the price again, causing another round of sales, and so on.

Leverage makes the returns that much tastier when asset prices are on the way up - which in turn takes prices up even further. But it also makes the collapse in prices that much more costly for everyone involved.

Of course, I'm grossly simplifying. In the past year or two, great tomes have been written on the precise dynamics of this latest boom and bust. But credit - and the leverage it created - was the core of the problem.

We know that small businesses and households are not seeing big a expansion of credit coming their way. But is loose credit driving a "risky" run-up in world asset markets? The conclusion of a report produced yesterday by Paul Ashworth, the Chief US Economist for Capital Economics, is "no".

Mr Ashworth went through the numbers looking for evidence to back up the view that the world was "awash with dollars", driving up asset markets in the US but also world-wide, via a revived version of the "carry trade". He didn't find find any. Yes, the monetary base - the narrowest measure of money supply - is expanding. It would be amazing it it weren't, given the Fed's asset purchases. But debt - or leverage - is not expanding. In fact, the evidence is that institutions are still trying to reduce the debt on their balance sheets.

He produces loads of charts to make the point. Let me just give you two here: the first shows how bank balance sheets are still shrinking. The second shows that the expansion of dollar liquidity (the amount of dollars in circulation) has been slowing down recently - though it's interesting to me that is still well above the rates of growth seen after the end of the dotcom boom in 2001.

I don't think this disposes of the question entirely. There's plenty of cash flowing into emerging market economies that wouldn't be captured in Mr Ashworth's charts. It may not be a "credit-type boom", but you could forgive those developing-country governments for failing to spot the difference.

More fundamentally, it is quite reasonable to worry - as Spencer Dale apparently does - about the long-term effect on asset markets of a prolonged period of extraordinarily loose monetary policy. It is just not very healthy to have the risk-free rate of interest (that is, the yield on government debt) set, in effect, not by investors but by the central bank.

Then again, there's a lot about the past few years that's been pretty unhealthy from an economic standpoint. We are where we are.

In the minutes of this latest MPC meeting, several are said to have pointed out that expanding the programme by £25bn would also "bring forward the point at which the extraordinary degree of stimulus could begin to be withdrawn, if the projected impact was realised."

They would rather not be here. And now here, they would rather get out sooner than later. They just need the broader economy to co-operate.

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The next government has to decide how to squeeze the budget, but as we all know, there's also the crucial question of when. As I reveal in a second film for the news bulletins tonight, in our BBC poll we asked people about that too (see yesterday's post for the first part).

Interestingly, 38% agreed with Labour and the Liberal Democrats that the economy was too weak to risk deeper cuts in spending next year. But more - 44% - agreed with the Conservatives, that not taking action posed even greater risks. An honest 18% said they didn't know. If asked, I suspect a lot of economists would be in that last camp as well.

On the question of timing, I suspect the difference in practice between a Labour and a Conservative government would be smaller than the difference in rhetoric suggests (see April's post "Spending slowing doing the work"). Both parties would expect to announce tough budget plans if elected - and both would tend to delay most of the pain until 2011 or 2012, when the economy is more firmly on the mend.

But if a new Conservative chancellor did want to act more quickly, he'd have to face the irony that it's hard to cut spending in a hurry - especially in a recession. As Geoffrey Howe discovered in 1981, the fastest way to cut borrowing is almost always to raise taxes.

The big moves in that famous - or infamous - budget were all tax rises. He froze personal allowances - a big tax rise with inflation running at more than 15% - and put a windfall tax on North Sea oil profits, and the banks. All told, he raised £4bn - around £12bn in today's money.

You might remember that 364 economists wrote to the Times protesting the Budget. I made a film about it for Newsnight in March 2006.

If you'd polled voters in advance, I doubt you'd have found many in favour of Howe's tax rises. And the same is true today.

As I revealed yesterday, a clear majority in our poll wanted spending cuts to take most of the burden. But 69% did say they would support the Liberal Democrat idea of a "mansion tax" on houses worth more than £1m. It didn't go down very well when Vince Cable announced it - to the surprise of many of his colleagues - at the Liberal Democrat party conference. But housing is relatively under-taxed in Britain today - Martin Wolf is one of several economists who have since supported Cable's idea.

The political downside of that kind of tax is you'd be handing a relatively small number of households - less than 250,000 - with a very large bill. The economic downside is that you wouldn't raise very much cash: the Liberal Democrats' initial estimate was that it would bring in £1.1bn, but there are a lot fewer £1m houses around than there were.

As the Howe example suggests, to raise a lot of money you have to raise a tax that lots of people pay or bring in something entirely new. Right now, that has some suggesting a carbon tax.

In our poll, 39% were willing to sign up to a carbon tax. The ABs were most keen, with 46% supporting the idea. Others were less keen, possibly because we reminded them that a carbon tax would raise the cost of heating and fuel.

Others, perhaps remembering Howe's first budget of 1979, tell us to expect the Conservatives to raise VAT, or, say, remove the zero-rating for books and newspapers, or the reduced rate for domestic fuel.

That was the least popular option in our poll. Only 31% would be willing to support a VAT rise to 20%, which would raise nearly £5bn a year. There was an interesting age difference here, with 37% of 16-24-year-olds in the poll coming out in favour, versus 29% of over-65s. If anything, you might have expected the reverse, given that VAT is the tax that younger people are most likely to pay.

As the Liberal Democrats have shown, the idea of a windfall tax on banks is unlikely to go away. Nor will the debate over the timing of deep budget cuts. But with borrowing so high, there aren't many either/ors. The answer may end up being "all of the above" - and a longer working life as well. But not quite yet.

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Is the great British public prepared for the tough budget times ahead? We recently commissioned a poll to answer that question. I'm unveiling the results in two films for the evening news bulletins tonight and tomorrow.

In the summer, the public debate on budget cuts moved further than many expected - including the prime minister. Voters know that things will be tight. But the message of our poll is that most voters have still not got their heads round the scale of the problem.

In the Budget, the chancellor forecast a public deficit of £175bn in 2009-10. As I'll be discussing later in the week, there are good reasons to think the final tally will be a bit lower. But by any reckoning, there's at least an £80bn hole in the budget that the recovery is not going to fill.

In considering where these savings might be found, economists and mainstream politicians have tended to emphasise spending cuts - and it looks like the voters agree. Asked whether borrowing should be cut through spending cuts and/or tax rises, a majority - 59% - said that cuts in spending (including benefits and tax credits) should do the work. 34% said it should be tax rises, and 22% did not have an opinion either way.

But voters were equally clear on the parts of spending they would protect. 63% agreed that "the NHS should be protected at all costs, even if it means imposing larger cuts on other public services or tax rises". Interestingly, the support for the health service was strongest among older people: 71% of over-65s agreed with this statement, compared to 55% of 25-34-year-olds. Regionally, the greatest support for the NHS was in the north-west, where 77% said the NHS should be protected from any cuts.

Both Labour and the Conservatives have said they will continue to increase spending on international development, in line with various government UN and G8 commitments. Some polls have found the public at odds with the politicians on this one. But in our poll, we were surprised to find strong support. That may well have been because we stated both the size of the budget (£6.3bn) and its share of public spending (just under 1%) in the background to the question.

Asked to choose between two statements, 64% agreed that Britain "... should keep its promises and protect the aid budget." Only 32% sided with the view that "helping others is a luxury we can't afford. Development aid should have no special protection."

What struck me here was the regional difference: a stonking 80% of respondents in Northern Ireland, and 77% in Yorkshire and Humberside, wanted to keep money flowing to DFID (Department for International Development). Among Londoners, the proportion was 59%.

The poll was taken after the party conference season, when the Conservatives had proposed a one-year pay freeze for public sector workers earning more than £18,000 a year, excluding the armed forces.

We asked people about a range of options for public sector pay, and 90% of respondents were in favour of at least one of them. (Specifically, 5% said they favoured none of them, and 5% said they didn't know.)

Just under half of those polled - 48% - supported the Conservative proposal of a one-year freeze, for an eventual saving of around £3.2bn a year. But only 31% would want to extend it to two years. The most support was for a 5% pay cut for the top 10% of public sector workers, with 56% in favour.

Interestingly, squeezing the high-earners in the public sector was most popular among the better-off, or "ABs" in the pollsters' terminology. They came out 64% in favour of a pay cut for the top ranks, compared to 52% among "C1s" and 54% among "DE" or working class respondents. According to a joint report by the Institute for Directors and the Taxpayers' Alliance, such a pay cut would raise about £1.2bn a year.

There are more potential savings on offer from reining back "middle-class welfare" - but, as the prime minister has discovered with the plan to get rid of childcare vouchers, perhaps also a lot of votes to be lost.

George Osborne has proposed ending tax credits to families on more than £50,000 a year. But, as I commented at the time he gave his speech, this would raise a paltry £400m a year.

No politician has dared to question the case for a universal child benefit, which is untaxed and costs nearly £12bn a year. As Reform pointed out recently in its report The End of Entitlement, that's four times as much as the government spends on Jobseeker's Allowance.

In our poll, we asked people what they thought of abolishing all child benefit and child tax credits for families on more than £31,000 a year, for a saving of around £6bn a year. 48% of respondents were in favour, and 42% against.

There was an interesting gender divide on this: men were clearly in favour, 51% versus 37%, but only 44% of women were in favour, and 47% against. Unsurprisingly, C1s were more supportive, with 52% in favour, than the ABs who would be affected. They were split down the middle, 44% against and 44% in favour.

Tomorrow, I'll be talking about the timing of budget cuts, and the options for raising taxes. We asked people about those as well. But the conclusion for the spending side of the debate is that we have a long way to go.

Imagine the next government did freeze the public sector wage bill for one year, and cut wages for the top 10% of public sector workers, and get rid of child benefits and tax credits for middle class families. That could deliver a permanent saving of maybe £10-£12bn a year, as against a structural budget hole of £70-80bn.

George Osborne gave his "brave" speech to the Conservative party conference. The chancellor will add some detail to his plans to cut borrowing in the pre-Budget Report next month.

Both men know that there will be a lot more tough choices ahead. The question is how many they can afford to share with the voters this side of the general election.

Update 17 Nov: An earlier version of this post contained slightly different numbers in paragraph 4 - now emended.

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