KEY POINTS:
Forget Winston Peters and his silly talk of neutron bombs. The really explosive stuff will come at this weekend's National Party conference. It will have nothing to do with Peters and his shenanigans. It is far more important than that.
Choosing his words carefully, Bill English will strike at the heart of Labour's re-election strategy. His speech will seek to spike Labour's plans to run another scare campaign of the likes that plagued National in the 2005 election.
That campaign warned of cuts to public services should Don Brash have become Prime Minister. It worked. Labour is pinning its hopes on it working again this year.
National is under mounting pressure to explain how it will pay for further tax cuts along with its plans for extra government spending without slashing public services or borrowing billions more.
How National will fund its promises has become even more pertinent as the economy plunges deeper into recession and so tax revenue declines.
National has avoided these questions, but it cannot hide at its own conference. It has to offer clarification this weekend.
Even so, English, as National's finance spokesman, won't say much in his address about how National will adjust its plans to cope with the impact of the economic recession on the Government's accounts. But he will make it clear National is not going to be spooked by a bit of red ink - as English describes it.
It is understood he will indicate National is relaxed about bigger deficits and is not going to be panicked into mounting some slash-and-burn exercise on government spending just to balance the books.
It remains to be seen whether he will say so specifically but the clear implication is National is willing to run bigger deficits than Labour. It can because it is relaxed about the impact on Government debt levels.
It will do so because English believes the economy will be in dire need of expansionary policies, not belt-tightening. It will do so because English believes the economy is robust enough to bounce back from a cyclical downturn and see a return to Budget surpluses.
Labour is framing the fiscal argument around "affordability". Labour will say National's plans are not affordable and will necessitate savage cuts in public services. It will run a fear campaign to scare middle-ground voters witless.
Labour's "Don't Put It All At Risk" advertisements prior to polling day in 2005 which intimated education, hospitals and other social services would all be stripped back by Brash, are widely credited with depriving National of victory.
National has not forgotten. No matter what the polls are showing, National will not feel comfortable until it closes off that avenue of attack.
English's conference speech is unlikely to contain any figures which indicate how red English will allow the ink to get.
The priority is to get across the message that National is comfortable about running bigger deficits and will therefore not have to cut government spending overall. That does not mean National will not have different priorities on how it spends the money. The important thing is it does not mean overall budgets for big-ticket items like health and education will be slashed.
A seeming willingness to go deeper into the red than Michael Cullen is prepared to do is an audacious move. It is not more of National's "me-too" cuddling up to Labour's policies. It is a case of being more Labour than Labour.
Cullen believed he had left National no room to move in the Budget. As far as he was concerned he had spent the lot - or enough without provoking the Reserve Bank into hiking interest rates.
Cullen has watched National say it will maintain more and more of Labour's schemes, the latest backtrack coming on the extension to the Working for Families programme, which leave National having to factor another $200 million into its reckonings.
At the same time, Cullen has taken an almost perverse delight in watching tax revenue forecasts fall. Cullen this week revealed the Treasury now expects cash deficits over the next four years will increase on levels forecast in the Budget he delivered barely two months ago.
But if Cullen thought National had been painted into a corner, English is poised to knock down the wall and expand the room.
He will do so by adjusting how much National borrows for capital projects.
National has major plans for boosting the country's infrastructure, but would fund projects by borrowing rather than revenue streams. The argument is long-life projects should be paid for over decades rather than out of tax revenue immediately to hand. The less National borrows for capital spending, the more room to borrow to cover a higher cash deficit.
Cullen's response to English's speech will be fast and furious. Cullen will accuse English of being fiscally reckless and making it even harder to contain inflation while pushing public debt up to unacceptable levels.
English will counter that the way the economy is heading, the Reserve Bank will have no difficulty cutting interest rates regardless of additional inflationary pressures.
The crucial thing for National is to shift the argument away from what happens to government spending. If Cullen wants to talk about debt levels, then fine. National argues those levels are very low. It does not feel obliged to ones which Cullen has imposed on himself.
As time passes fewer voters are old enough to remember the blow-out in debt in the 1970s and early 1980s. And anyway, debt is too esoteric a subject and something unconnected to their daily lives for them to be exercised by it. English's initiative is not risk-free - not least in how the Reserve Bank and the financial markets respond.
But National is willing to take any questioning of its commitment to fiscal rectitude on the chin if voters are reassured it will not be using recession as an excuse for cutting back the role of the State.
English's willingness to accept red ink - at least for the short term - marks National's final break from the fiscal shibboleths of the Ruth Richardson-Bill Birch era. It is another victory for John Key's pragmatism.
Labour will claim that many in National will privately squirm at the direction Key and English are taking the party. But that ignores one very important thing. National has been out of power for nine years - its longest period in Opposition since the 1940s. Right now, getting back into power is all that matters to the party. To ensure victory it will do - to quote one of Key's pet sayings - whatever it takes.
