John Rentoul: Horse riding, yacht hopping, country supper eating ...

The PM has been horribly exposed by the Leveson Inquiry. What's more, he seems not to have thought about the issues confronting it

Distraction: Leveson has helped draw attention away from David Cameron's economic travails (AFP)

David Cameron did quite well at the Leveson inquiry last week. He put on a show of nervousness that made him look more like a normal person and less like an Old Etonian who is "charm personified", as Rebekah Brooks said in her text to him. That text, received when he was leader of the opposition, was certainly embarrassing. To her. One of the few genuinely revelatory moments from the Leveson inquiry was that example of how far some media people would crawl to try to impress a politician.

For Cameron, there were no hard questions, and no damning emails saying, "Dear Rupert, I'll fix it for you to have 110 per cent of BSkyB." But this judge-led inquiry into "the culture, practices and ethics of the media" has been a disaster for the Prime Minister and we could have told him so. Not because it has exposed a corrupt relationship with the media. It has hardly even tried. The inquiry seems determined to reveal that politicians try to gain a fair hearing in the media and that journalists sometimes fawn and flatter to try to get politicians to speak to them.

This is rather different from corruption, such as a party offering commercial favours in return for Murdoch's support. Cameron lent credence to this idea two months ago by saying "we all did too much cosying up to Rupert Murdoch". There is nothing wrong with "cosying" unless it takes financial form, but Jeremy Hunt provided the circumstantial evidence of just that by writing to the Prime Minister while Murdoch's bid for BSkyB was being considered by Vince Cable to say: "If we block it our media sector will suffer for years."

Lord Justice Leveson said that it was not his job to investigate the handling of the BSkyB bid, but his meandering media studies seminars ("Politicians are more spinned against than spinning. Discuss.") have done terrible damage to Cameron nonetheless. Although the Prime Minister came across modestly enough on Thursday, the rest of the evidence disclosed by the inquiry has painted him as a horse-riding, country-supper-eating, yacht-hopping member of the Out Of Touch Club.

So why did Cameron set up the inquiry? The one thing that we often overlook, because we are not used to coalitions, is Cameron's need to manage Nick Clegg. It was when the Deputy Prime Minister had an attack of principle – the principle being party differentiation within the coalition – that Cameron conceded Ed Miliband's demand for an inquiry. It was not the right way to investigate phone hacking, or bribery of police officers, or ministerial bias in handling a media takeover, but it allowed Liberal Democrats to boast that they had never met Rupert Murdoch because he had never been interested in them.

Having commissioned the inquiry, however, what is extraordinary is that Cameron seems not to have had any plan for how to use it. The most telling exchange came towards the end when the judge said (I paraphrase) well, Prime Minister, this media regulation business, what do you think the answer is? Ooh, I haven't really thought about it, Cameron replied (I paraphrase again), I was sort of hoping you might come up with something. They batted around some stupid ideas, such as Downing Street refusing to speak to journalists as a punishment available to the replacement for the Press Complaints Commission, and that was that.

Not only has the Leveson inquiry been bad for Cameron's image, but it has distracted from any message that he or his Chancellor might have on the economy. Not that the Government has a message on the economy.

Take the Chancellor's Mansion House speech last week. In it, Osborne spoke of the level of borrowing inherited from Labour and was reduced to declaring: "In the space of just two years, we have cut that deficit by a quarter." How dim did he think his audience of "bankers and merchants" was? This means that he is balancing the books about half as quickly as he intended two years ago.

No wonder he sought to distract his audience with some scheme to encourage bank lending involving very large numbers. This looks a bit like a Keynesian Plan B, which is why the Chancellor's spin doctors called it "maxing out Plan A". In fact, it is neither. It merely offsets the restrictive effects of the locking of the stable doors, otherwise known as the bank reforms designed to prevent another financial crisis.

Having briefly convinced the markets, 37 per cent of the voters and the Liberal Democrats that they had a plan to fix the deficit and the economy two years ago, Cameron and Osborne are now back to making it up as they go along.

They are back to being the opportunists who tied themselves to Gordon Brown's borrowing in the boom years – before reversing to condemn him for failing to "fix the roof while the sun was shining". They are back to being the chancers who thought the banks should be allowed to fail and who opposed Brown when he saved the world.

One of the reasons why the Budget in March was so disastrous for the Conservatives, apart from the tax cut for the rich announced for next year, and apart from the incompetence of the U-turns on policies that would have raised less than £150m a year, is that it was when Osborne was forced to admit that eliminating the deficit in one parliament was being held in a queue and would be answered in the next one.

As our ComRes poll today suggests, Osborne has pulled off the trick that usually takes politicians at least two parliaments, of appearing both out of touch and incompetent. Nearly half, 48 per cent, agree that he "has made too many mistakes to be taken seriously".

On second thoughts, perhaps the Prime Minister was helped by the Leveson inquiry distracting attention from his economic policies.

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