Steve Richards: Don't panic! Shop! See a show! Get on a plane! Are they serious?

The cry has gone out from leaders across the world: "Don't Panic!" With an eye on a looming global recession, they urge us to go out and spend our money, return to the theatres, head for the shops, get on those aeroplanes at £7 a flight. We respond by staying at home speculating on the speculation coming out of Washington, wondering if Osama bin Laden is in a tent in Afghanistan or on a Tube train on the Northern Line. The louder they cry, the more we panic.

Here in Britain the Secretary of State for Culture, Tessa Jowell, has admitted that the tourist industry is in crisis again, having never recovered from the foot and mouth disaster. Foreign travellers were thinking twice about heading for Britain; now they are not even thinking. Airlines are making thousands of people redundant. This is on top of the economic downturn that was already placing a strain on other companies.

Along with all the other grim consequences, the atrocities in the US present a distinct political and economic challenge for the Government. It has made its reputation above all else on presiding over economic stability. The central importance of this should not be underestimated. In presentational terms, the most famous soundbite of a government famous for soundbites is "we have brought you an end to boom and bust". Admittedly, no government could have foreseen the events of Tuesday 11 September, but then again no government has boasted so forcefully and so far convincingly that it could transcend the economic cycle. If this becomes another government that "brings you another round of boom and bust", its entire raison d'etre will be called into question. The basis of Gordon Brown's economic strategy – to reform in the context of economic stability – would be blown to pieces.

So would the precise objective that has driven the Chancellor since he came to power, and, indeed, well before that. His priority has been work, work, work. The welfare reforms that he has initiated – in effect, Mr Brown is in charge of welfare reform – are based on encouraging people into work, raising more tax revenues that enable him to be more generous to those classified as "incapable" of work. This virtuous cycle that functioned so well in the first term will not function at all if those more than "capable" of working are being made redundant in large numbers.

Most crucially of all, the Government's commitment to invest in public services will be unachievable if there is a serious downturn. The last election campaign was so soporific it is easy to forget, but public investment was the centrepiece of Labour's appeal to the voters: if you vote for us you will get the investment in schools, hospitals and transport. If you vote for the Conservatives you will get someone called Oliver Letwin imposing billions of pounds of cuts. What would happen if Mr Brown, rather than the obscure Mr Letwin (so obscure he is now shadow home secretary) imposed the cuts instead? It would be the equivalent of John Major reversing his promise not to cut taxes after the 1992 election.

Some of last week's headlines suggest that this was precisely what Mr Brown was threatening to do. Having been Father Christmas for a few months, he was back to his more traditional role of Scrooge, warning his docile cabinet colleagues not to spend any money because all of it would be required to finance Mr Blair's latest war. In fact, Mr Brown said something entirely different, although it was not especially palatable to everyone sitting around the cabinet table. He warned that there would be no additional money on top of the existing spending pledges that would still be met.

This in itself will not endear Mr Brown to the likes of Tessa Jowell, who is under enormous pressure from the tourist industry to come up with a financial package. Stephen Byers will not have jumped for joy when he realised that he would not be getting additional money to help the begging airlines. But Mr Brown spent virtually his entire contingency budget with considerable reluctance on appeasing victims of the fallout from foot and mouth. He is even more reluctant to dig into other emergency budgets now. Ms Jowell is keeping her fingers firmly crossed that if Britons are not flying, they will flood to rural areas of Britain, and if Europeans are not flying to the US, they will fly here instead. This hardly amounts to a rescue package.

But then again, this hardly amounts to a crisis in Mr Brown's economic strategy either. Every year or so he is deflected by an apocalyptic event – the floods, the anarchic petrol blockade, foot and mouth, a war – but he plods on. Treasury sources insist that Mr Brown was not bluffing about his refusal to find more short- term cash (they could hardly say anything else), but they are also adamant that the broader spending plans can be met, that Britain is well-placed to deal with the global downturn.

This is partly because the Treasury coffers are still bulging, even if Mr Brown's contingency fund is empty. We should not forget that Whitehall failed, with spectacular ineptitude, to spend all the cash Mr Brown allocated to the various departments last year. His recklessly prudent approach in an economic boom during the first few years of the first term also means that he should be able to spend in the downturn now.

There has always been a question mark, anyway, about where the money was going to come from after the next two or three years. Spending levels are higher than anticipated growth, and that was before the planes hit the World Trade Centre. Mr Brown was asked about this constantly during the election campaign. The answer was never clear. One theory was that Mr Blair's growing interest in the private sector – an interest shared by Mr Brown – was partly due to the fact that the Government itself would not be able to raise the cash for services. The Treasury insists this is not the case. Perhaps Mr Brown has some more stealthy taxes to uncover. Although his fame as a stealth Chancellor is a politically dangerous contradiction in terms.

But all these were issues before "the war". The current conflict does not necessarily change the economic prospects. So far at least, there has been no equivalent of the quadrupling of oil prices in 1973 that changed everything from the price of a cup of tea to the fate of a succession of helpless governments. All that is required now is that we don't panic. In the current climate, that might be asking too much.