I'm delighted by David Cameron's announcement this morning that the pledge to match Labour's spending plans for 2010-11 has been abandoned. In his speech he annunciated very clearly that the Conservative approach to the financial crisis will be based on sound money, with no unaffordable spending or borrowing.
David Cameron will have some unpopular messages over the next few weeks, but they will all be based on sound money. He will make clear that you can't borrow and spend excessively and have £30 billion of tax cuts at the same time. In the end, there has to be a day of reckoning. He knows that a Conservative government will have to pick up the bill, and is trusting the British people to realise that it cannot have its cake and eat it.
Cameron's strategy, it seems to me, is to ensure that under a Conservative government outside investors would have confidence in our economy and that it would be run on a sound financial basis. If not, we won't get any growth because no one will put their money here and our currency will weaken even further. That's what lies behind this announcement.
So I applaud his speech today. It radiated prudence, competence and realism.
This speech signals the return of clear blue water between the Conservatives and the Labour Party. Since the war, every Labour government has ended having presided over a financial crisis - 1947, 1967, 1976 and now 2008. Every Labour government has ended with unemployment higher than when it came into office. This one will be no different.
Electorates always punish governments who lose their reputation for sound economic management. It happened to Harold Wilson in 1970, Edward Heath in 1974, Jim Callaghan in 1979 and John Major in 1997. I see no reason why the electorate will come to a different judgement this time and boot this lot of economic illiterates out. Unfortunately, by the time that happens they will have borrowed so much and spent so much money that they haven't got, that it may take years to undo the damage.