On cross-dressing chancellors

The Tories are "doing a Brown" - pledging to keep within Darling's spending controls rather than pro

Challenging any government that has delivered a decade of non-inflationary growth is difficult, even more so when the person most identified with that stability is Prime Minister. Yet, as the Northern Rock crisis showed, reputations for financial and economic competence can vanish in the blink of an eye.

David Cameron's decision to attack the government at the height of the affair, as nervous savers stormed the doors of the Newcastle lender, may not have been the smartest bit of timing. Yet his core criticism that new Labour had allowed Britain to embark on a credit binge remains true.

The UK has been on an unprecedented borrowing spree, accumulating £1.3trn of consumer debt, roughly the same as our national output. It is as if the whole country had taken out one of the trailer-park mortgages that began the present convulsions in the financial markets.

All of this ought to be a fantastic opportunity for Cameron's Tories. Over recent months they have unfurled a series of economic initiatives designed to make the Conservative Party more electable. They have learned at the master's knee. Rather than make promises of deep-seated changes to the present Budget, thereby opening themselves to charges that the Conservatives are somehow less committed to the National Health Service and education than Labour, they have pledged to live with the Alistair Darling spending settlement, scheduled to be unveiled in October.

In effect, they are doing a Brown. In his first two years in office as chancellor, Brown adhered to the Budget projections he had inherited from his predecessor Ken Clarke, much to the frustration of the left. It was only after Brown had accumulated a war chest from strict spending controls and sale of the mobile phone spectrum that Labour started to deliver its agenda.

Eventually, NHS spending doubled. It is projected to reach £88bn this year.

Cameron and the shadow chancellor, George Osborne, are doing their best to keep their radicals in check. Every spending or tax-cutting idea has to be approved by their two-person committee. They have kept at bay tax reform and competitiveness proposals by the right-winger John Redwood and the Next boss, Simon Wolfson.

Everyone remembers how Brown skewered Michael Howard and Oliver Letwin at the last election when, as chancellor, he spelled out that tax-cut pledges could only be funded by huge spending cuts. Cameron and Osborne do not want a repeat of the experience.

This does not mean that the Tories have no tax-and-spending policies. Their "golden rule" is that tax cuts can come only from the dividend that comes with a growing economy. At the margins, they believe that a more efficient government, which would not have wasted £6bn or more on an unworkable NHS computer system, might find better ways of spending the money.

Cameron and Osborne, like all Conservative governments, call for tax simplification. But while they talk about it, Brown has been delivering. His last Budget began the process of dismantling the vast array of tax breaks for big companies - and replacing them with a lower corporate tax rate.

This was pinched straight from the Tory song sheet. Similarly, that Budget began the process of reducing the complication of personal taxation by removing the 10 per cent tax band. Britain's economy is too sophisticated to adopt fully the "flat taxes" that have brought enormous growth to the countries of eastern Europe and Asia. Yet Brown took some steps in that direction.

One of the great battlegrounds at the next election will be inheritance tax. When this was first introduced it was intended as a way of breaking up the estates of the super-rich, but it has become a tax on the middle class alone.

Of all the Redwood ideas, the abolition of inheritance tax and reform of capital gains taxes have the greatest populist appeal to Middle Britain. So far, Brown has been reluctant to write off this income source. Indeed, he sought to tighten the rules. Yet many believe that, if push comes to shove, Labour will steal Tory clothes and take tens of thousands of householders out of range of these taxes.

The Conservatives intend to press for technical changes to the way the independent Bank of England operates and to improve the independence of fiscal controls. But such reforms are not easily understood by the public, even if they please the economist gurus.

What the Tories need to do is to convince voters that they will be better managers of the public purse and that Labour has squandered Middle Britain's hard-earned cash for very modest returns in health care, education and poverty reduction. Only then will Cameron become electable.

Alex Brummer is City editor of the Daily Mail