Leading Article: Mr Cameron's struggle to regain the initiative

The Conservatives have a stubborn credibility problem in this crisis

There are times when official oppositions can seem to do no right. The present financial meltdown is one of them. David Cameron now faces some of the trickiest decisions since he became Conservative leader. To some extent he is a victim of simple bad luck. Last week the unthinkable suddenly seemed possible: a run on the international banking system. The sense of national emergency persuaded the Conservative leadership that there was no alternative but to support the Government's recapitalisation plan. As often happens, a national emergency effectively marginalised the Opposition.

National crises, moreover, give governments opportunities to transform their fortunes. Even Gordon Brown's most virulent critics would have to admit that the Prime Minister has conveyed an impression of grip so far, although the plaudits may have been overgenerous.

Mr Cameron's speech to the City of London yesterday was his attempt to regain the initiative. And his trenchant criticisms of Mr Brown's economic policy showed that the "truce" with the Government is well and truly over. We should be pleased by that. Experience teaches that when oppositions acquiesce in hugely significant government decisions, bad policies often result. Democratic politics works best when there is opposition and scrutiny by rival parties.

But this need for robust opposition scrutiny is also why the speech the Tory leader delivered yesterday was disappointing. First, there was a tonal problem. Mr Cameron sounded defensive and jittery, as if he was addressing not the country, but critics within his own party or the City for his failure to take the fight to the Government.

The substance was also less than convincing. It is, of course, legitimate for Mr Cameron to expose Mr Brown's disingenuousness in arguing that this is essentially an American crisis that has infected the rest of the world. Mr Cameron is also justified in pointing out that the manner in which Mr Brown piled debt on to the national credit card left the public finances ill-placed to absorb the costly fallout from this crisis.

But there were also uncomfortable distortions in the economic analysis put forward by the Tory leader. The destructive crisis of confidence in financial markets resulted not from loose Government spending, but from the recklessness of highly paid financiers who inflated a credit bubble without understanding the securities in which they were trading. It is a meltdown of private, not public, sector borrowing.

The Government's culpability lies primarily in its failure to regulate the financial sector adequately. Mr Brown, who hubristically claimed to have eliminated the cycle of boom and bust, deserves blame. But who were the most consistent cheerleaders for light-touch regulation of the City? Step forward the Conservative Party.

This goes to the heart of Mr Cameron's present dilemma. For all his success in changing perceptions of his party, the Tories are still widely associated with the deregulating ideology that underlies this crisis. Mr Cameron has to address this uncomfortable history head on. Talk of championing a new era of "economic responsibility" is not enough. He needs to repudiate the excesses of the free-market dogma that have prevailed in Conservative circles for so long. Otherwise, Mr Cameron will continue to have a credibility problem in presenting the Tories as the true party of sound money and economic reform.