David Cameron suffered the most significant defeat of his premiership this week when his government lost a Commons vote on the EU budget. Eurosceptic Conservatives joined the Labour party to vote for a cut in the European Union's budget, leaving the prime minister in an bind over future negotiations.
Also this week: A major report from the Commission on Living Standards revealed that by 2020, the typical family on low incomes will be worse off than in 2008 if current trends continue. As wages remain stagnant and living costs rise, the majority of households are being squeezed.
Joining Tom Clark in the studio this week: the Guardian's Martin Kettle, Gavin Kelly, chief executive of the Resolution Foundation and Heather Stewart, the Observer's economics editor.
We also hear from the Guardian's Ewen Macaskill in Washington who believes that Barack Obama's strong handling of the natural disaster on the eastern seaboard will stand him in good stead for next week's election.
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