Bruce Anderson: The Tories must seize back the agenda if they are to win

They are still seen as a party of the rich for the rich – immune from economic woes

Perhaps it was the approach of Christmas which led Gordon Brown to confuse himself with the Messiah and claim to have saved the world. It was a bizarre moment. How do you define megalomania? Gordon Brown experiencing self-doubt. As the original Messiah could have warned the PM, saving the world is no easy task. Nor is saving the British economy.

At present, the full extent of the bad news is still concealed behind the Christmas decorations. But it is going to be a very cold January, with spring indefinitely postponed. There is still a danger that the recession will turn into a slump and in large areas of the economy, the money supply has effectively dried up. This has led Tim Congdon and Gordon Pepper, both rock-ribbed guardians of monetarist orthodoxy, both notorious for lecturing hungry sheep about the price of grass – to advocate printing money on a huge scale.

There may be an argument for arriving at a similar result via targeted reliefs. The greatest threat to the long-term health of the British economy comes from an implosion in the small business sector caused by a sharp reduction in bank lending. There is no point in the Government trying to prevent this by shouting at the banks, when the regulators are instructing them to rebuild their balance sheets and to make provision for toxic loans. The only solution is a government guarantee, underwriting 75 or even 90 per cent of bank lending to smaller businesses.

That would have been a much better use of the Government's limited resources for a fiscal stimulus than the pointless reduction in VAT, which most customers have barely noticed. What is the point of stores proclaiming a two-and-a-half per cent cut when they are already placarded with advertisements for vastly larger discounts? This year, the January sales started in November and they will last all the way through January. There is only one problem; January of which year? The German finance minister's complaints about the Brown nonsense were wholly justified.

It was lucky for Mr Brown that they came from a German. There is still something about strictures from Germans that makes British hackles rise, especially when they are merited. What is the definition of schadenfreude? A German giving good advice. Apropos of Germany, there is a serious point. For the past 20 years, many British commentators – including this one – have written about German economic sclerosis, the obsolescence of the Rhineland model et al.

There was always one difficulty: relating those comments to the experience of visiting Germany. I recall a Munich conference that Norman Lamont and I attended some years ago, at which we turned to each other and said: "Where is this German economic decline?" Today, it is less visible than ever. If that is sclerosis, we could do with some of it.

The Germans found the Brown measures incomprehensible. A package for economic recovery that will merely waste money; is this the famous British sense of humour? With this British Prime Minister, however, it is how decisions are taken: on political grounds. Gordon Brown knew that a cut in VAT would not require a finance bill and could be implemented immediately, unlike an income tax cut. He also believed that it would help him to draw a sharp distinction between his values and the Tories' lack of them. Here was he, helping ordinary families – while the Tories had nothing to offer.

This also explains the proposal to increase the top rate to 45 per cent after the election. The sum raised would do little to reduce the Brown deficit. Indeed, the notional fiscal contribution could be more than counterbalanced by the depressive effect on the animal spirits of the striving classes. But the PM hoped to trap the Tories into opposing him, so that he could accuse them of protecting their rich friends and neglecting everyone else.

Mr Cameron refused to be trapped, which was wise. But this is not enough. Over the past few weeks, against all expectations, Mr Brown has made the political weather by pretending to be controlling the economic weather. Although this illusion may not survive the oncoming storms, it would be foolish to assume that bad economic news will automatically destroy the Government's standing.

Mr Brown's poll ratings have improved because he had two advantages. He was in power and was able to act. He also possesses enough chutzpah to give two entirely misleading impressions: that he understands what is wrong and knows how to put it right. He is noisily offering the voters an umbrella, in the hope that enough of them will forget that he caused the rain.

The Tories have a different approach. Like all other sensible persons, they are still trying to make sense of recent events. Above all, they are concerned to ensure that nothing is done to make a grave situation even worse. Some of them have also assumed that Gordon Brown's position would founder, because of its manifest intellectual dishonesty.

In the long run, that must prove true, but as the latest Wall Street scandal should remind us, a Ponzi scheme can survive for a good middle-run if a clever con man is in charge of it. Mr Brown's electoral Ponzi only has to work for a maximum of 18 months.

Apart from an excessive reliance on magna est veritas et prevalebit, the Tories have two further weaknesses. Bad economic news inevitably awakens memories of the 1980s, as if long-healed war-wounds had suddenly started to play up. It is true that Mrs Thatcher dominated the politics of the Eighties, but that owed more to her opponents' divisions and incompetence than to her own popularity. The surgery was necessary, so they are wrong to do so, but a lot of people still shudder at the memory of Dr Thatcher and her apparent enthusiasm for amputations without anaesthetics.

David Cameron is determined to bury his party's reputation for heartlessness, but economic hardship makes his task harder. So does another unhelpful legacy. Even though the modern Tory party is full of meritocrats, it is still widely seen as a party of the rich, by the rich, for the rich, whose members are immune from economic worries. That is nonsense, but Mr Brown will do everything possible to make it seem plausible.

The Tories ought to counter this in two ways. First, by stating – at more than speech length – their views of the present crisis and the way out. They should neither be afraid of complex reasoning nor of intellectual honesty. Second, at the right moment, they should broaden the debate to include the broken society as well as the broken economy. Until this happens, it will be far harder than it ought to be to challenge Mr Brown's claim to have a monopoly of values.