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Johnstone's View 12th June 2009

For the past two months, the parliamentary expenses scandal has pushed economics out of the headlines and now we have the Prime Minister fighting for survival as the government descends into chaos, apparently incapable of looking beyond the next twenty four hours. This leadership crisis is bad for the country and, like so many other things Gordon Brown has done, it is also bad for the economy.

It's not just the job’s of a few cabinet ministers and the accident prone leader that are at stake in this crisis however, it’s the jobs of thousands of ordinary men and women which are at stake as international confidence in the United Kingdom is further damaged on a daily basis.

In these difficult times, the challenge for any alternative government is to provide the clarity, leadership and direction the country needs and to show that we have learnt the lessons of the last decade, and offer the country a new British economic model which can see us through these darkest of economic times.

Conservative economic policy in a new Government will be rooted in three key areas. The immediate priority is to restore Britain's international credibility and preserve our credit rating with a clear plan to deal with the huge budget deficit - because we will all pay a heavy price if our countries credibility is lost.

The medium term priority is to make the transition from an economy built on excessive debt to one built on savings and investment - because when the recovery comes it must be sustainable.

For the long term, our priority must be to re-focus our economy from the rush for short term gains to the pursuit of long term returns - because we need to end British short-termism if we are to raise our potential and our productivity.

If we follow these three priorities we can do much more than simply survive this recession, we can emerge from it with a stronger, more geographically balanced, and more broadly based economy in which more of us, including those in Scotland who feel disaffected and excluded, feel they are sharing in its success.

We must not be satisfied with turning back the clock to how things were before the crisis, or we risk simply pumping the bubble back up. That would mean failing to understand a crucial insight that has become increasingly clear - that the model of economic growth pursued over the last ten years is fundamentally broken.

We can no longer rely on cheap borrowing from China and the rest of Asia to fund our standard of living. The drivers of change we have depended on - housing, banking and rising Government consumption - cannot be relied upon to drive growth in the decades ahead. In short, you cannot build lasting prosperity on a mountain of debt. The tome is right to explain how a new British economic model can emerge from the wreckage of this recession.

Given the scale of Britain's public debt crisis, the immediate priority for the next government must be to restore Britain's international credibility and retain our crucial triple-A credit rating which is now under serious threat. If it is lost we will pay a heavy price in higher interest rates on government borrowing and even bigger increases in our national debt.

However, credit rating agencies and international investors are looking beyond the next election to the potential next Conservative Government for reassurance that Britain will take the steps necessary to bring our surging national debt under control. That is because we have consistently underpinned our economic policy with a firm commitment to fiscal responsibility.

Three years ago, when Gordon Brown was still borrowing at the peak of our economic prosperity, we made sound money our priority. Last Autumn we opposed the temporary VAT because we thought it was an expensive mistake. In reaction to the Budget we made it clear that the Government's spending plans do not constitute a credible plan for returning the public finances to balance.

Conservatives now have advanced in plans to create an independent Office for Budget Responsibility that will take over responsibility for publishing the Budget forecasts and will hold us to our commitment to return the government finances to current balance.

Our highest priority must be the transition from an economy built on debt to one built on savings and investment and re-focusing our economy from the rush for short term gains to the pursuit of long term returns.

Harsh though it is, this economic crisis offers the opportunity to build a new British economic model. There is an alternative economic vision and it will be on offer at the next election. I look forward to making it a reality.