Kenneth Clarke: The many failures of our 'Iron Chancellor'

It is not surprising that Gordon has spent three years desperately trying to get out of No 11

Far from building on the strong economy he inherited, growth and investment have been below what was achieved before 1997, public spending is out of control and Gordon Brown's tax policies have been anything but fair. Instead of making the UK more competitive, the Government's economic policies are remorselessly eroding our national competitiveness.

It is not surprising that Gordon has spent the last three years desperately trying to get out of No 11 and into No 10. A chancellor should only be judged by one measure - the state of the economy he leaves behind. Gordon is going to leave some grisly problems for his successor. His economic legacy will be a growing issue between now and the next election, and it will still haunt him if he becomes prime minister.

But it is no good Conservatives believing that we will win the next general election because the economy is in trouble. The aim of Conservative economic policy should be clear: to create an enterprise society where we seek the Holy Grail of steady growth and low inflation.

Government can help to create the right conditions for growth in a number of ways. The first of these is competent policy management at the centre. New Labour's economic policy management has been characterised by an obsession with spin and rhetoric, excessive regulation, conflict between the Prime Minister and the Chancellor and a wholesale fiddling of the figures. All this must stop.

The Treasury must be the centre of economic policy making. The Department of Trade and Industry should be scrapped. I know that upsets the panjandrums of the business establishment, but if we no longer have nationalised industries, we don't need a department to run them.

We need high-quality statistics compiled by a truly independent statistics body. I marvel at the fuss Labour made about our use of statistics in the past. They have manipulated and misused statistics in a way that has shocked the most hardened commentators.

I also believe that we need independent economic forecasting. I began to pursue this line when I was at the Treasury. You will not be surprised that I met some resistance. But I see no justification for the continuance of the present system.

A Tory government should scrap Labour's experiment with a three-year spending cycle. We need to reinstate annual spending rounds with an agreed maximum total at the outset. It has some disadvantages, but it is the only way to work. A three-year straitjacket is inefficient and produces inflated budgets.

To make matters worse, Labour has failed to come up with an effective mechanism for ensuring that increased resources for public services reach the front line where they are needed. I do not argue that is an easy thing to do - I know it is not. I do say that Labour's approach has completely failed. What is more, the public knows it. They can see that they are not getting value for the increases in taxation.

If you criticise Labour's spending programmes, you are met with the silly knee-jerk response that you want to cut spending on schools and hospitals. Well, I do not want to cut spending on schools and hospitals; these ought to be priority areas for public spending under any government. The trouble is that Labour has not just put money into these areas. What they have done is to scatter taxpayer's money across the public sector like a Grand Prix winner spraying champagne over the crowd. That is irresponsible, and does not deliver better public services.

While my party is fundamentally a lower tax party, reducing the tax burden can only follow reducing the growth in public expenditure. Tax cuts that are made before public spending control is achieved can only be financed by borrowing, and borrowing is merely tax deferred.

And probably the first area for tax relief will need to be pensions and savings rather than cuts in direct personal taxation. It is vital that we encourage people to save more for their retirement, and the best way to do that is to have incentives in the tax system.

The success of the government formed after the next election will depend on its ability to deliver a strong economy. The Conservative Party must always stand for stable economic conditions that enable enterprising people to create the wealth upon which we all depend. If I became prime minister, I would be looking for a real "Iron Chancellor" to clear up the mess left by Gordon Brown.

The writer is a Tory leadership candidate and former chancellor