The Gordon problem

Suddenly the question is everywhere: what's gone wrong with Gordon Brown? What started as whispers at the heart of Downing Street has now spread. The public are turning off him in droves. The business community he courted is deserting him. Most tellingly, Labour MPs are queuing up to attack the man they elected unopposed to lead them less than a year ago.

Some think that Gordon Brown's problems are all about style. One ministerial aide has the bright idea that the Prime Minister should turn up on the sofa on Friday Night with Jonathan Ross. Judging by his cringemaking appearance last week on American Idol, that's not something anyone would wish to inflict on television viewers.

I am no fan of Gordon Brown's character. I shadowed him in the Commons for more than two years, saw the worst of it, and I know why his closest PR advisers worry about it. But they are missing the central point.

The striking thing about the divisions in the Labour Government is that they are not merely arguments of style but ones of substance. That makes them much more lethal and destabilising. For how can a Labour Party fighting itself be expected to fight on behalf of London and the rest of the country?

The Justice Secretary Jack Straw, no less, is lobbying against the Prime Minister's criminal-justice plans for detention without charge. When he is not fighting the Justice Secretary, the Schools Secretary Ed Balls is waging a war against the Government's own education reforms to further his own leadership ambitions. Perhaps most damaging of all, more than 70 Labour MPs have come out against the centrepiece of last year's Budget - the 10p tax rise on the incomes of the lowest paid.

They know that in places like London this will hit the very families who thought Labour was supposed to be on their side. Sadly, I suspect many Labour MPs will lose the courage of their convictions by the time Parliament votes on the tax rise next Monday- - though the whole of London will have its chance to pass its verdict when it votes in the Mayoral elections a week later. A vote for the freshthinking Boris Johnson is a vote against all arrogant and out-of-touch Labour politicians.

In one respect, this great tax revolt in the Labour Party is a massive political failure by the Prime Minister. I am always amazed that Gordon Brown still carries a reputation in some circles as the great master strategist. Even a cursory look at the last three Budgets and pre-Budgets would surely make people think twice. One was exposed within hours as a giant tax con when the 10p tax rise was revealed; the next lost Labour the support of the business community and ceded the intellectual agenda to the Conservatives; the third and most recent sent Labour to new lows of unpopularity as Mondeo Man saw his car and his pint and his small business all hit with new taxes.

But the root of the problem is not political but economic. Governments should be there to help people when they need it. It should set aside money in the good years so it can make life easier for families in the difficult years. So we shouldn't be seeing taxes rise in a downturn. The lowest paid in London shouldn't be targeted by the Exchequer when they are already struggling with a rising cost of living.

This speaks to a wider point. Brown rested his claim to economic competence on three pillars: stability, prudence and productivity. Those three pillars lie broken. For after a decade of worldwide growth driven by the emergence of China, we have ended up with housing boom followed by threatened bust, spending followed by debt, and a country fearing for its economic future.

The financial regulation system created by the former Chancellor failed its first test with Northern Rock. The budget deficit is the worst in the developed world. The tax burden is at its highest ever in peacetime. Trust in the tax system has been destroyed by stealth. Unimaginably large sums of people's money has been wasted on public services that didn't know how to spend it properly. And now the debt bubble that so many, including myself, warned was growing has burst and threatened the stability of the whole economy.

In short, Gordon Brown has been found out. His claims to economic competence are exploded. The selfstyled Iron Chancellor has had his mettle tested and failed.

Of course, given the disarray in the Government, there is unlikely to be a general election any time soon - much to my regret. The responsible thing is to wait to see the economic conditions at the time of the election before we can set out our final economic plan for the country, including changes to income taxes. The country understands that.

But it is already clear that there is a Conservative alternative. We would help families who cannot afford high mortgage fees by taking nine out of 10 first-time buyers out of stamp duty. We would take family homes out of inheritance tax by lifting the threshold to £1 million. We would help London businesses large and small create jobs with a lower tax rate and a simpler tax system. We would fix our system of City regulation by giving more powers to the Bank of England to intervene in a crisis.

We would put the public finances on a safer footing by growing government spending more slowly than the economy grows. We would overhaul our welfare system so that money isn't wasted on those who should be working. We would free our schools to provide the rigour and discipline and standards demanded by the modern world. And we have set out ideas on capital rules that could help prevent another debt bubble. This is the alternative to the failed policies of Gordon Brown. It's not just the man but his measures that we need to change.