The job needs doing - but this bail-out is no triumph

IN THE end, the Government ran out of options. With the British banking system in danger of collapse, an angry taxpayer has had to step in and risk billions of pounds to rescue some of the biggest high-street banks. Millions of people earning salaries of £15,000 or £25,000 are using their tax money to bail out the bankers who were paid 10 times or even 100 times that. They had to because if the banking system fails then everything fails. People fear for their savings, families can't get mortgages or re-mortgages, businesses fail and jobs are lost because loans aren't extended.

So we had to rescue the banks to rescue the whole economy. That is why David Cameron made the right judgment when he said this kind of recapitalisation might be necessary a week ago and why he showed the right leadership when he said the Conservatives would work constructively with other political parties on solving the immediate crisis.

But to regard today as a triumph, as some in government seem to do, is bizarre. And it misjudges the public mood. For this is no triumph. It is a necessary but desperate last-ditch attempt to prevent catastrophe.

Let us sincerely hope that the billions of pounds of public funds we are putting at risk today do the job, bring some semblance of calm to the financial markets and start the credit flowing again through the veins of the economy. That shouldn't prevent us from seeing this for what it is: the final, sorry chapter of the Age of Irresponsibility. The moment when Gordon Brown was finally forced to confront the consequences of building a 10-year economic boom on a mountain of debt.

For we should never, ever have reached this point. There was nothing inevitable about it. Our banks could and should have behaved more responsibly and taken fewer risks. Indeed, those that did, like HSBC, have been rewarded for their prudence by emerging relatively unscathed. Our regulators could and should have spotted the risky bets many of the banks were taking and stopped them.

That's what some bank regulators around the world did, such as in Spain, but not here in Britain. And our government could and should have used the good years of global growth to set aside money for a rainy day. That's what many governments did by building up budget surpluses, such as they did in Australia and Sweden; but in Britain, Gordon Brown racked up the biggest budget deficit in the western world.

So what next? In the short term, we taxpayers must insist on certain conditions in return for our money. I will look carefully at the small print of the deals signed with the banks over the weekend. I want to make sure that everything is being done to keep the risk to the taxpayer to the minimum possible. That means asking existing shareholders first to stump up the cash. It means ensuring that the taxpayer benefits if the value of the banks increase as a result of this deal.

I will also want to know why the plan changed over recent days so that the Government is now potentially taking majority control of some of the biggest banks like Royal Bank of Scotland, and could put representatives on the board. Just five days ago, Mr Brown and Alistair Darling were telling us that appointments to the board were "entirely a matter for the bank". What changed?

In the medium term, we need to overhaul the banking practices and regulatory system that left us in this mess. When Gordon Brown scrapped the old system and replaced it 10 years ago with the new Financial Services Authority, he also removed the power of the Bank of England to keep an eye on overall levels of debt in the economy. I think that was a huge mistake. We Conservatives want to give that responsibility back to the Bank of England, so someone has the power to call time when bank borrowing gets too high.

Of course, this won't do anything to help families who are struggling now to pay their bills or who are worrying about their jobs. So the Government should adopt our plans to support people in the economic slowdown instead of leaving them to cope on their own. Conservative plans to freeze council tax, abandon the new car tax, keep businesses facing bankruptcy afloat and help low-income families with heating bills could all be put in place in the coming months.

Finally, 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, for we know that it, too, leads to economic ruin. When I hear Gordon Brown claim that all the problems we face "came from America" and the expensive solutions devised around the world were "made in Britain", it makes me wonder whether he is prepared to learn anything from his own mistakes.

It was in Britain not America where families borrowed more than any in the world, and where we became so dependent on the success of financial services. It was in Britain not America that a government based its entire economic policy on the delusional belief that boom and bust had been abolished.

It is extraordinary, now that the economic record of the past decade has been shredded and the economic policies pursued by the government over that period are discredited beyond repair, that Mr Brown never once paused for breath and said: "Yes, I was the Chancellor for the 10 years these problems emerged and I acknowledge my responsibility for what has happened."

I can promise you, Prime Minister, that we'll help you with the emergency action to save the banks but we will hold you to account for your failures. You presided over the biggest economic disaster of our lifetime and we will not let you forget it.