The great rebound in George Osborne’s political fortunes continues with the news that the Chancellor now heads the ConHome Cabinet league table for the first time. Obviously, the economic recovery forms the basis of the Osborne surge – but it was last month’s popular Budget measures that took him to the top of the table.

This should be a lesson to the image-obsessed Cameroons: policy matters. While the Conservative Party has some significant economic policies (note the plural), it does not have an economic policy (note the singular) – i.e. it lacks an overarching account of the fundamental weaknesses of the British economy and the long-term changes required to put these right.

Tellingly, the Budget had very little to say about the most important economic issue facing Britain today – what Chris Giles of the Financial Times calls the ‘productivity puzzle’:

“While output per hour worked used to grow annually by about 2 per cent, it has not expanded at all since 2007. Without this productivity growth, there is no means of raising living standards except in the short term if people spend more than they earn.

“The puzzle of why productivity appears to have stopped growing is no closer to being solved and it casts a shadow over Mr Osborne’s Budget.”

The Chancellor is a like a doctor who puts a patient back on her feet by conscientiously treating her symptoms, but doesn’t attempt a diagnosis of the underlying condition.

To be fair, Osborne’s Keynesian enemies have no proper explanation for the productivity puzzle either. While they quite rightly draw attention to the sudden collapse of productivity growth when the financial crisis hit, they place all the blame for it on the ensuing austerity – which is like saying that a house fell down because it wasn’t rebuilt afterwards.To explain the productivity puzzle we need to look at what happened before the crash.

In particular, we must face up to the truth that for many years – indeed many decades – the size and productivity of the British economy was artificially inflated by a multi-faceted debt-fuelled Ponzi scheme orchestrated by successive governments.

When the mechanism by which the scheme was kept going – i.e. the banking system – seized up in 2008, the whole thing came crashing to the ground, plain for all to see.  The reason why so much ‘productivity’ suddenly disappeared, never to be seen again, was that it never really existed in the first place.

The Conservative leadership has publicly identified certain elements of what went wrong – principally the debts run up by the last Labour government – but it has yet to acknowledge the bigger picture.

Fortunately, there is at least one Conservative MP willing to recognise the enormity of what went on (and is still going on). His name is Steve Baker, the Member of Parliament for Wycombe. Here are a few extracts from his website:

“The UK money supply tripled between 1997 and 2010, widening wealth inequality, raising house prices out of the reach of young people and reorienting the economy towards the City, the South East and housing. Arguably, such an inflation will have destroyed real capital too. Sadly, this chronic inflation has been going on for 40 years since the Bretton Woods monetary system broke down…

“The measures taken by the central banks and the Government, including ultra-low interest rates, quantitative easing and…‘credit easing’ are creating further problems including increased disincentives to saving, atrocious terms on annuities for those about to retire and further distortions to the structure of the economy…”

Baker approaches these issues through the prism of ‘Austrian school’ economic theory; but with all due respect to him and his colleagues at the Cobden Centre, this isn’t the most important aspect of his analysis. The thing that really matters is his willingness to take a step back and take a view of the British economy in its entirety.

The Conservative Party will not have a real economic policy until more of his colleagues do the same.