Steve Richards: A hard lesson for the Tories to learn

Cameron has struggled to come up with a clear line over this crisis

How to behave as an opposition in a crisis? There is no easy answer. Even the most accomplished opposition leaders can be thrown by relatively trivial national emergencies. In 1996, when John Major declared a "beef war" against Europe, Tony Blair panicked. Should he be sensible and expose the stupidity of Major's desperate jingoism or should he be safely silly and support him? After a frenzy of discussions with advisers he chose to be safely silly. He backed the "war". For David Cameron the current crisis is a much bigger test than a contrived battle over beef.

During their tentative truce with the Government the Conservatives have managed to maintain a line of attack, one that is not without substance. It is obviously a useful campaigning tool to point out that Gordon Brown claimed to have ended "boom and bust" when he was Chancellor. Mischievously, they conflate Brown's bar-room slogan with the separate argument that he spent with wild imprudence when he was Chancellor. The Tories have a potent although misleading slogan about failing to save money for a rainy day. The slogan ignores the chronic underinvestment in Britain's public services that required urgent redress, but nonetheless it works as a political device in an economic crisis. The Conservatives can also point to their consistent warnings over the years about the level of public and private debt. As a bonus they are able to refer back to 1997 when some of their leading figures argued that the newly independent Bank of England lacked tough regulatory powers.

But none of this gets near to recognising or addressing the scale of the current crisis and the shift that has taken place in the relationship between the state and the financial markets around the world. The global crisis exposes in itself the limitations of blaming everything on Brown. Although the Prime Minister is now portrayed in some quarters as the leader of the entire world he cannot be held responsible for the collapse of banks in the US, Iceland and Switzerland. Something much bigger is going on. Even the minimalist view of what has happened over the last few weeks, that there has been a failure of regulation alone, accepts implicitly that there must be a new relationship between the state and the financial markets. The minimalist interpretation underestimates the scale of the change in my view, but demands still the search for a new regulatory system. This will be complex, fraught with potentially explosive problems and will in itself demand a more active role for government.

At the very least such a change presents ideological challenges for Cameron and George Osborne who were brought up politically in the era of the Big Bang. At a meeting of Fabians at Westminster this week the minister Ben Bradshaw argued that Labour was "more relaxed about state ownership compared with the Conservatives". Bradshaw hails from the Blairite wing of new Labour and illustrates the way in which events have, if nothing else, given some ministers a sense of linguistic freedom.

In some ways there are parallels for Cameron in the dilemmas Neil Kinnock faced during the miners' strike under Margaret Thatcher in the mid 1980s. Kinnock was torn as to what to do. He instinctively sympathised with the miners, but disapproved of the leadership and strategy of Arthur Scargill. He was scathing about what he saw as Thatcher's ruthless brutality and yet appreciated some of the arguments she was deploying. He wanted to say more, but knew that his party was largely in favour of the strike and felt constrained. Later he was to reflect that his evasive approach was his biggest mistake as leader. Here was an epoch making event and he should have come up with a clearer narrative.

Over the last few weeks Cameron has struggled to come up with a clear line over this crisis. Normally he and Osborne are skilful at the art of political choreography. Almost instinctively they know what to say and how to say it. This time they have not got the rhythms quite right. The awkwardness is not surprising. Some of Cameron's assumptions as a political leader are bound to have been challenged as Kinnock's were as he reflected on an epoch changing industrial dispute. Cameron's party too is an issue. I suspect many activists will agree with John Redwood who is critical of the Government's rescue package, remains as wary of the state as ever and looks for substantial spending cuts as one way of leading us towards so called prudence.

For Cameron, who has not challenged his party as often as generous mythology suggests, it must be tempting to keep his head down in the same way that the normally courageous Kinnock led ambiguously during the miners' strike. But I suspect that the Tory leader senses this is a big moment that demands more than a safety first approach. Immediately after the US nationalisation of Fannie Mae and Freddie Mac I got the impression that Cameron saw that the momentous events demanded at the very least a significant clarification of the Conservatives' approach to markets. The events are more momentous now. There was another hint in Mr Osborne's article in the Evening Standard when he argued that "in the long term we all have to learn some profound lessons about the way free markets work. Laissez-faire is dead. But let us not replace it with suffocating state control". He is exactly right, but the question is how does the state assert some effective control without making it suffocating? It is not an easy one to answer.

One senior Conservative tells me that the party's strong support for robust regulation of the privatised utilities demonstrates that it has never believed in a laissez-faire approach, but he accepts that many perceive them as reckless free marketers. I am told that Cameron plans to do "something big" when the markets calm down. Perhaps this will take the form of a series of speeches, starting with one he is delivering today on the economy, or something more substantial. But for the Conservatives to be remotely credible in this changed world they need to show conclusively they have learnt the "profound lessons" about the way free markets work and sometimes fail to do so. Attacking Brown is not good enough.

s.richards@independent.co.uk