The Conservatives have not, so far, distinguished themselves in this economic crisis. David Cameron did little in his first two years as party leader to burnish his economic credentials. He championed social causes and he kept his distance from big business. His economic mantra was a pledge to “share the proceeds of growth”, a fuzzy policy at the best of times, a meaningless one when the economy goes into decline.

Mr Cameron’s “compassionate Conservatives” have, until recently, been Budget Brownites: the Tory party spent two years promising to match the government spending levels set by Gordon Brown. And, over the past year, Mr Cameron and George Osborne, the Shadow Chancellor, have struggled to keep pace with the events unfolding in the financial system.

They have occasionally delivered a decent critique of the Government, often provided a clever soundbite and, now and again, offered lukewarm support for emergency government action. But they have not provided a convincing account of how they would have handled things differently, let alone outlined a credible alternative to the bank recapitalisation scheme put in place by Mr Brown and Alistair Darling, the Chancellor. As a senior party figure put it recently: “David and George have not had a good war.” The Times/Populus poll published yesterday morning suggest that British voters are of the same opinion: Mr Brown and Mr Darling now have a sizeable lead over Mr Cameron and Mr Osborne on the current handling of the economy.

But since the Pre-Budget Report (PBR), the Conservatives have stopped fumbling for a response and taken a much firmer position. Mr Cameron has set himself and his party in unequivocal opposition to the approach taken by Mr Brown. The Prime Minister has authorised a huge increase in public borrowing to mitigate the effects of the recession by putting money in people’s pockets through the cut in VAT, by spending on public services and state infrastructure and by flushing money through the tax system into small businesses. Mr Cameron, on the other hand, has positioned the Tories against the fiscal stimulus, arguing that the cost of repaying public debt will choke a future recovery.

For the first time, there is a clear choice between Left and Right on how to govern the economy through the recession. The PBR, it seems, did more than just shatter new Labour’s economic credentials; it marked the beginning of the end of the Blairite consensus on the management of the economy. There are now fundamental differences between the Conservatives and Labour on tax, borrowing and public expenditure.

Mr Cameron’s position is good economics. There is a growing danger that a rising fiscal deficit in 2011 will be met by the return of inflation and, therefore, rising interest rates. This is likely to mean not just higher borrowing, but also higher borrowing costs. The combination could severely jeopardise the future growth of the British economy.

But the politics will not be easy. Labour will, inevitably and understandably, paint the Conservatives as the “do-nothing” party. The logical extension of fiscal restraint over the next two years is to refuse requests for life support from businesses, big and small. The Conservatives will be arguing for the Government to stand by while industries fold and jobs disappear. In the longer term, the party of fiscal responsibility will also have to be committed to the fundamental reform of public services. This is not the “compassionate” manifesto that Mr Cameron and his colleagues hoped to present to voters at the next election. The Conservatives have now set out a powerful and coherent argument on the economy. The hard part will be sticking to it.