THERE have been moments of higher drama – the Chancellor's personality and delivery do not generate excitement – but there has been no peacetime announcement in the House of Commons more significant for the lives of the British public than last Monday's Pre-Budget Report.

When Alistair Darling rose to speak, the national debt stood at £612bn; by the time he sat down it was spiralling inexorably towards more than £1 trillion. The closest parallel to the relationship between Gordon Brown and Darling was that between Rod Hull and Emu. As his ventriloquist's dummy announced the measures that sentenced the British economy to death, Gordon smiled complacently. That was when the realisation struck: we are in the clutches of a madman.

The hubris induced by spending other people's money has divorced Brown from reality. Britain's financial crisis began at that same despatch box in 2002, when he micturated £60bn of taxpayers' money against the wall. Now, for the sole purpose of winning the next general election (an ambition doomed to failure), he has tried to buy a two-year deferment of pain for the electorate at a price so high it may break our economy for a generation. George Osborne rightly claimed "this Budget is all about the political cycle, not the economic cycle". This rag-bag of placebo politics lacked all coherence. Reducing VAT from 17.5% for the next 13 months is unlikely to have much effect, with shops already implementing price reductions of up to 95%. The worst-case scenario is that, against expectations, it does work – and fuels deflation. The planned 1% increase in corporation tax for small businesses has been postponed; a new 45% income tax rate for "fat cats" earning £150,000 a year is promised; then there is the pièce de résistance: an increase in national insurance that will exact an extra £4bn in de facto income tax from middle Britain.

For those who relish the big issues, the Chancellor found time to sermonise about loft insulation. That put the final touch to the atmosphere of surrealism in which this dismemberment of the economy was conducted. So did the announcement of a fire sale of public assets for privatisation by an appropriately named official called Mr Grimstone: the Royal Mint, the Tote, the Meteorological Office, Urenco the uranium enrichment company ("Sold to the Iranian gentleman in the back row!").

If Brown had tried to sell off one of those pieces of the family silver a few years ago, Dennis Skinner would have had to be dragged out of the Commons chamber by half a dozen heavies. Now, in a buyers' market, they will go for a song, to the taxpayers' cost – just like our gold reserves, another market coup by Gordon. Brown has cynically calculated, in the spirit of a retreating Wehrmacht general setting demolition charges, that if the Tories win the next election he will have left a scorched-earth economy behind him. Try tax-cutting and freeing up individual enterprise in that lunar landscape, Cameron, is his message.

The Conservatives need to respond radically. They have to recognise that last Monday was the British economy's 9/11 and everything is changed. Forget all the teacakes-and-doillies minutiae that have so far passed for a Tory fiscal policy: the two-year council tax freeze; the six-month VAT holiday for small and medium businesses; the 1% cut (at least going in the right direction) on national insurance, for six months, for firms with fewer than five employees. Gordon tore up the Geneva Convention last week. This is war. So let us have a strategy for serious tax-cutting in the two places it really counts: personal income tax and corporation tax. The country needs a pledge that, on day one of a Conservative Government, Gordon's Schlieffen Plan will be reversed.

When Labour came to power Britain's savings ratio stood at 9.6%; this year it is negative. Britain has £1.4 trillion of private debt. Put some fiscal incentives back into thrift, Dave. Forget Darling's £5bn savings from cutting public waste: the available saving is £20bn and in a crisis like this it can be increased to £30bn, even if it means losing some of the most gifted makers of paper-clip chains in public service.

Fiscal reinvention is urgently needed and Labour is out of the game. It is a tabula rasa on which Tory ingenuity should be able to write a new narrative for Britain, as it did when preparing for government in the late 1970s. It is time to forget all the politically correct nonsense, the "nasty party" neuroses, the sub-Blair posturing. Time to take down the daft whirligigs from the garage roofs, to confront the electorate with the unvarnished truth and to become once again the natural party of government and of economic competence.