Investors would be wrong to expect much of the fog to clear on the future of British fiscal policy when the Labour government delivers its budget this month.

Opinion polls suggest an election, expected on May 6, is no longer going to be a walkover for the opposition Conservatives, putting Labour's pledge to halve a record budget deficit between 2011 and 2014 back under the microscope.

Warning of a Greek-style crisis, the Conservatives want to get to work this year on the deficit, set to top 12 per cent of gross domestic product in 2010 - similar to Greece's current burden.

But markets are largely in the dark as to how the Conservatives would do that and they are unlikely to get much more information from either party until after the election.

As such, any major reverse on budget day - a slide in sterling or leap in gilt yields - may look unwarranted.

The Treasury feels it has given markets enough detail for now with a thorough plan for reining in borrowing, and Finance Minister Alistair Darling is not about to change tack.

"We will be sticking to the very clear strategy we have set out since the PBR (December's pre-budget report) - supporting the economy through the recession while living within our means in the medium term with a clear deficit reduction plan that we put into legislation," one Treasury insider said.

Mindful of market concerns about national debt levels following the global downturn, the government is enshrining in law its pledge to cut an estimated £178 billion deficit to 5.5 per cent of GDP in the financial year 2013/14.

Achieving that will require some politically-difficult and big spending cuts and tax rises on top of those already announced - the black hole markets want filled.

A government spending review is being held off until after the election, but the current plan implies many departments could be facing significant cuts of around 17 per cent.

"It's lose-lose," said Alan Clarke, an economist at BNP Paribas. "If you don't announce more details or more tangible measures the market won't like it and, if you do, it will hurt your voting."

Investors are worried that the budget - widely expected on March 24 but not yet announced - could be hijacked by some Labour policymakers eager for some vote-winning measures. Discipline may be all the debt hawks can hope for at this stage.

"It's not going to be a giveaway budget," the Treasury source said.

The Conservatives, who would call another budget within 50 days of taking office, are at the mercy of similar gods.

Their sterner approach has found favour in the markets but has appeared to hurt the party's popularity among voters who are still most worried about the recovery.

So far, the opposition has only identified £1.5 billion worth of extra cuts for 2010/11. It indicates much of its fiscal consolidation will be targeted at spending, which is often harder to realise than raising money from tax hikes.

Markets may like the opposition's rhetoric but they don't yet have the detail or the political certainty to act on it.

And there is, in truth, no consensus on how best to cut the deficit.

Some, including the International Monetary Fund, support Labour's fear that withdrawing support too soon would put the brakes on Britain's frail recovery from an 18-month recession.

Others back the Conservative view that delaying cuts could - in a worst case scenario - endanger Britain's triple-A credit rating, drive up borrowing costs and hold back longer-term growth.

While the scale of problems facing other debt-laden European nations such as Greece, Spain, Ireland and Portugal look an unlikely prospect in Britain at present, markets are starting to turn the screws.

Sterling fell to a 10-month low below $1.50 last week.

"There is a premium priced in to sterling for bad news," Mr Clarke said. "If they take the tough decisions and tighten fiscal policy in the near term, you get rewarded. Sterling could appreciate if you get some austerity."

But, worryingly for investors, the policy freeze has spread beyond the realms of government.

The Bank of England, which has halted its £200 billion asset-buying spree and is trying to weigh up when to raise interest rates from a record low of 0.5 per cent, is also waiting for more certainty on the fiscal outlook.

"Monetary policy is in limbo until the scale and pace of fiscal tightening becomes clear," said Charles Davis, senior economist at the Centre for Economics and Business Research.

"This uncertainty has led to markets becoming increasingly edgy about the United Kingdom economy."

BoE Governor Mervyn King does not see the UK credit rating being cut but has said he expects "either in the next budget or after the general election, measures will be announced that will make clear precisely how this deficit will be tackled".