We can no longer afford an economy built on debt

We are in the eye of a financial storm and these are deeply anxious times for all Londoners. Banks are going bust, people are worried about their savings and families are struggling to pay their bills at the end of the month.

Some of the certainties we had got used to are disappearing before our eyes. It's no wonder that people are worried that their children won't have the same opportunities and enjoy the same standard of living that they did.

At times it must be difficult for families to understand what the link is between the various financial events unfolding on the television news — the nationalisation of Bradford & Bingley, the haggling in the US Congress and the grim news about unemployment. But that link can be summed up in a single word: debt.

In Britain, and America, we forgot something we should never have forgotten. An economy built on debt is not an economy built to last. For a decade the whole world enjoyed the good times, and nowhere was the boom greater than here in Britain. Banks, businesses and families borrowed as if the party would never end. Household borrowing in Britain ballooned to the highest ever recorded in a major economy — more than a trillion pounds of mortgages, credit card bills and household debts.

Instead of trying to call time on the party, Gordon Brown encouraged it. "Think you're borrowing too much?" he said. "Well, don't worry, because your government is borrowing even more." Instead of putting money away during the good years to save for a rainy day, he plunged the budget into the red.

But now, the party is over. Brown's debt-fuelled boom has turned to bust. And just when you need your government to be fighting on your behalf, Labour ministers are fighting among themselves. Just listen to what they — not backbenchers or activists but government ministers — are saying about the Prime Minister. "All he does is re-state the problem, he doesn't address it," said one. "Gordon is not rescuable, and I'm not the only one around the table who thinks that," is the verdict of another.

A Prime Minister obsessed with short-term survival is never going to be able to deal with the long-term challenge of tackling government and private debt. But this week at our Party Conference in Birmingham, you can see that the Conservative Party under David Cameron is rising to this challenge. Unlike the Government, we are united and completely focused on the country's problems, and are setting out a detailed economic plan not only to help people in this very difficult time but sort out the long-term problem, too.

First, we will call time on the financial irresponsibility and reckless banking debt that is now threatening to bring the financial system to its knees. We will introduce a tough new Debt Responsibility Mechanism that will require banks to put money aside during the boom years to ensure they're not left vulnerable when things go wrong. This Debt Responsibility Mechanism will be enforced by the Bank of England, which will be given new powers to take action if lending gets out of hand. What does this mean for you? It means that banks will be better protected against collapse next time there's a downturn. And we will help prevent taxpayers getting stung when a bank collapses by introducing new rules enabling the seizure of banks that are about to fail.

If this system had been in place today, the Government could have avoided having to nationalise Bradford & Bingley, a move that could well cost Londoners thousands of pounds each in extra taxes.

Our position is clear. We want the City to succeed. We won't let the City of London disappear to the City of Geneva or the City of Dubai or the City of Mumbai. But if City financiers are taking risks and reaping the rewards, then they must bear the costs, too. If banks are paying out big dividends when they should be rebuilding their balance sheets, they will be held to account. I will not increase taxes on the family earning £20,000 to carry on paying the bonuses of the banker earning £2 million. As we have always said, there are no rights without responsibilities. This is what we have said to the poorest in our society and I am not going to say anything different to the richest.

Second, we will call time on irresponsible government borrowing and change for ever the way budgets are made in this country. Gordon Brown set nothing aside in the good years and left Britain with the biggest budget deficit in the advanced world. Central to this new framework will be our commitment: the next Conservative government will put the public finances on a clear path out of the red and into the black.
And to make sure you know we are sticking to our commitment, we will set up a new Office for Budget Responsibility, independent of government, just like the Bank of England is. This independent body will stand in judgment over us, hold us to our promises — and let the whole country know if we try to wriggle out of them. And it will have the expertise and the clout to hold future governments to account for failing to keep the public finances in good shape. So no more fiddling of the rules, no more dodgy statistics and no more hidden PFI borrowing.
Again, what does all this mean for you? It means the next time there's a downturn, government should be able to give you a hand, not hit you with new taxes like the 10p hike or the new tax on family cars. Instead of racking up debts for the future, a Conservative government will fix the roof while the sun is shining.

This is the week that the Conservative government sounded the death knell for Gordon Brown's era of irresponsible debt. We are showing that we have the unity of spirit and the clarity of vision to rise to the profound challenges that our economy faces.

These are uncertain times, and it is the Conservatives who have the plan to get us through and bring to an end Gordon Brown's age of irresponsibility.