I'd like to thank Reform and the London Stock Exchange for hosting this conference. We've heard from Ken Clarke, who I'm delighted has agreed to return to front line Conservative politics.
Ken is one of those increasingly rare things - a successful former Chancellor.
He took the tough decisions that got Britain out of the last recession and laid the foundations for what should have been steady and sustainable growth.
Sadly that growth became an unsustainable boom, and now we're in the bust.
For a decade, global imbalances built up as half of the world saved much more than they spent, and the other half spent much more than they saved.
The wall of easy money coming from the East offered the West unprecedented cheap debt.
This fuelled record amounts of household borrowing which in turn funded a surge in asset prices, especially housing.
And in Britain, at about the same time, a new financial regulatory system was created by a new Labour government that removed the Bank of England from its established role as a prudential supervisor.
This new regulatory system failed to identify the systemic risks which were building up as the cheap debt drove the search for yield in the financial system, and led to ever higher leverage and ever more complex innovation.
For a decade, the bubble grew - and the Government of the day joined in too.
They too leveraged up, borrowed off-balance sheet, spent more than they earned.
And when the bubble burst, Britain was the least well prepared of all of the major economies to weather the storm - as last week's grim economic forecasts from the IMF so clearly show.
Look at the facts which are staring the international community and the British public in the face.
Our housing boom was much larger than America's.
Our households are more indebted, with the debts to income standing at 175% for the average British family compared to 140% for the average American family.
Our banks were allowed by our regulators to become more leveraged too, with tangible assets thirty nine times tangible equity in British banks compared to seventeen times in US banks.
Our government budget deficit was greater entering this recession than any other advanced economy.
And our recent economic growth has been more reliant on banking than almost anyone else, with nearly two thirds of all new jobs in Britain over the last five years coming in financial services and the rest coming in an increasingly unproductive public sector.
The Prime Minister is alone in ignoring the evidence before him.
He refuses to accept that there were any mistakes of domestic policy, pretends Walter Mitty style that all along he was warning the world of the brewing crisis, and risks ridicule as he denies each week that boom has turned to bust.
None of this would matter if it were simply a question of vanity.
But it has much more serious consequences than that.
For this failure to acknowledge that the debt-driven economic model of the last ten years has been fundamentally unstable and flawed means that many of the policy responses to the present crisis are short term.
They are short term sticking plasters designed to patch up the balloon in the forlorn belief that it can then be re-flated and we can all go back to life before the crunch.
We cannot. We have to change our ways: change the way we bank, the way we save and spend and change the way we are governed.
We need, as David Cameron argued last week in Davos, to develop a new moral capitalism.
This requires long term thinking, and policy solutions that not only help us survive today but at the same time prepare for tomorrow.
That is what the Conservative Party is doing.
We certainly claim no monopoly of wisdom.
We need the ideas and input of think tanks like this one.
And we need the mandate of the British people to take the hard decisions that will be required.
What are the biggest questions we face?
Let me, today, examine three of them.
First, how do we build a properly regulated and safe, yet competitive and privately owned banking system?
Second, how do we deal with a government budget deficit that is higher than any in our modern history?
Third, how do we unwind the structural imbalances that have created an economy financed by the savings of others and build a recovery that can provide the millions of new jobs we will need to bring our unemployment rolls down?
Together, these questions amount to an inheritance that increasingly looks like being as bad as the one the Conservatives faced the last time we moved from opposition to government at the end of 1970s.
For the first time in generations, most people today think they will leave to their children a world more dangerous, and less prosperous, than the one they lived in.
That one fact speaks to the challenge ahead.
Let me examine each question in turn.
Financial services were Britain's largest and most lucrative industry.
They include our most internationally competitive businesses.
Yet today the whole thing would collapse into a black hole without government support.
From the hundreds of billions of pounds of guarantees that underwrite inter-bank lending, to the swap facilities offered by the Bank of England to maintain liquidity, to the new insurance being proposed to provide a back stop on bank losses, to the huge public stakes in some of our largest banks, the speed with which the most aggressively capitalist sector of our economy has become the most intensively supported by the public sector is remarkable.
There is no immediate end to that support. Indeed, parts of it may remain in place for years to come.
Even so, we must look to the future.
Too many of the government schemes announced have been confused and lacked detail.
They carry the air of things dreamt up to deal with this week's crisis instead of the carefully thought through components of a long term plan.
That plan must balance the desire to retain an innovative and competitive banking system, with the need for stable banking that does not put the whole economy at risk.
At its heart, I believe we need to develop a whole new settlement between the banks and society.
In the past, the deal was this. The Bank of England provided lender-of-last-resort facilities to look after banks that got into short-term difficulties.
In return the Bank regulated the banking system to ensure the system remained stable and that we didn't take on more debt than we could afford.
The system wasn't perfect, but from its inception in the 1860s it did have some success. Even through the Great Depression, we didn't have a run on a bank in 140 years.
A decade ago, that settlement was broken.
After 1997, the Government ceased to have a view on how over-extended our banks became.
As leverage started to build up, the Government was either woefully ignorant or wilfully negligent about the risks that were being run.
No doubt the bumper tax receipts flowing into the Exchequer meant no one was very keen on calling time on the merry dance.
But it has left us uniquely ill-prepared when the music stopped.
The Greenspan/Brown dogma - that we needn't worry about an asset bubble because we can always mop up afterwards - has failed.
We need a new settlement.
The new settlement must allow a profitable and successful financial services sector in the UK, able to explore new markets abroad and provide credit to businesses and families at home.
But it must also provide protection for taxpayers and the broader economy from the excesses we've seen over the last ten years.
Everyone agrees that we need to develop better market infrastructure to minimise counterparty risk, reform the rating agencies and ensure pay structures don't prioritise short term risks over long term sustainability.
We also need to start beginning to think about the exit strategy from the state shareholdings in RBS, Lloyds, and the nationalised banks.
But we Conservatives are planning for a more fundamental change.
We reject the idea that the only goal of macroeconomic policy is to keep consumer price inflation near target - and that we should restrict ourselves to just one tool - the short term interest rate.
We believe government should take a view on asset prices and seek to manage the overall level of debt in an economy.
Our proposal is to put the Bank of England in charge of that task.
Through a Debt Responsibility Mechanism, the Bank of England will monitor the levels of leverage in the system, operate an open-letter system with the FSA so their overall macro-prudential judgement can be applied to individual institutions through capital adequacy regulation, and so will call time on excessive debt.
There is an international dimension to all this, of course. As David Cameron and I argued almost a year ago we need to strip out the pro-cyclicality of current international banking regulation like Basel II and develop instead co-ordinated counter-cyclical capital rules.
In other words, we would require banks across the world to set aside more money in the good years to provide them with a greater buffer for the bad years.
I am delighted that this now appears to be on the agenda for the G20.
Adair Turner in his impressive recent speech also raises important issues not just of the regulation of our banking sector but of its structure too: how do we limit taxpayers' exposure while permitting the scale of activities that international competitiveness demands.
Clearly there are benefits of an internationally successful banking industry. But it is irresponsible to ignore the fiscal risks of massive international liabilities.
For the taxpayer is put at risk when we have banks that are too big to fail. But the whole economy is put at risk if our banks become too big to bail.
We should think carefully when it comes to exiting from state ownership, and in the application of our competition rules, about the shape of the banking system we want Britain to have in the long term.
Our aim should be a system that is safe and stable, but we must not lose sight of the goal of restoring Britain's reputation as a centre of global finance, and that means internationally competitive banks.
Stating that goal clearly and beginning to set out how we plan to reach it is very important in building confidence in Britain's future.
The second question British policymakers face is about the record deficit in the public finances.
The scale of the challenge is breathtaking.
The Institute for Fiscal Studies set it out clearly in their Green Budget last week.
They estimated that there is a £20 billion hole in the government's forecasts compared to the PBR figures just two months earlier.
They say that it will take more than 20 years to pay off the debt the Government is now accumulating.
And that's the optimistic scenario.
There is little sign that the present government even want to engage with this problem.
Their only response to any discussion of how we get government living within its means again is to parrot the tired old language about "spending cuts".
So it will be an urgent task of the next Conservative Government to entrench fiscal responsibility for the long term.
We intend to put in place the most advanced, most credible fiscal architecture in the world.
We will create a new independent Office for Budget Responsibility, to monitor and report on the sustainability of the public finances. I know it will create a rod for my back if I am Chancellor. I want it to create a rod for the back of any future Chancellor.
We are consulting with Ken Rogoff and Sir Alan Budd on exactly how the system will work.
How will we make the public finances sustainable without crippling tax rises?
We have set out a three-pronged approach.
I set out last week, we are developing a programme of spending discipline, so that within tight spending limits we can get value for money and tackle waste. We will do this by changing the incentives in Whitehall, by radical transparency of information, and by equipping the Chief Secretary to investigate waste and spending best practice.
But reducing waste is not enough. So we have well developed plans to deliver ambitious reform to schools, healthcare, prisons and welfare. Together with our social programme of tackling social breakdown, these reforms will reduce demands on the state, and the deep seated drivers of public spending.
This is our framework to ensure the government lives within its means.
And it leads to the third great question Britain faces: how can the whole country live within its means and pay its way in the world?
Our current debt crisis is a reflection of the fact that we have not paid our way in the world.
Our trade balance went from a $7 billion surplus in 1997, to a $95 billion deficit ten years later.
And that deficit of exports over imports has been paid for mainly by borrowing from abroad. As Mervyn King has said, "the UK banking sector has been relying extensively on external capital flows, principally short term wholesale funding, to finance its lending activities."
The same is true of our government. Last year, three quarters of our government debt was bought overseas.
Of course righting the global imbalances must be tackled internationally.
Yesterday, for example, I was with David Cameron when he discussed how countries like China can boost consumption with Premier Wen.
But while the imbalance might be global, that does not mean we should not act at home, and ensure we can pay our way in the world.
And to do that we need to become more productive. We need nothing short of a second supply side revolution.
As Ken Clarke set out this morning, this means a radical change of direction.
We need a stronger and broader economy.
That means a dramatically simpler tax system, and we now have detailed proposals about how to deliver that.
Education reform will be vital. That's why we are devoting huge time and effort to ensuring we can deliver changes to the structure and standards of our school and further education system.
And we are deadly serious about creating a low carbon economy, with all the manufacturing jobs that will bring. I believe the low carbon policy paper we published last month, which includes plans for a new smart electricity grid and high-speed rail network, is the most coherent and visionary plan produced by any major political party in the world.
All these measures will allow Britain to find economic strength that we need to give confidence in our recovery, to begin to grow our exports once again, and to pay our way in the world.
Expanding our export base is one side of rebalancing our economy. The other side is rebalancing how we pay for growth.
We cannot return to an economy which borrows in the short-term to pay for growth.
Instead, over the long term we need structural change in the amount we save as a country.
When overseas capital dries up, it is only by restoring domestic saving that we can maintain domestic investment.
Yet our national savings rate is one of the lowest in the developed world.
Again, as Mervyn King said recently: "As part of a longer-run rebalancing of the UK economy, an increase in our national saving rate, both private and public, is necessary'.
So over the long term we need to save more as a nation. And as a Government we need to support savers.
That's why we have called on the government to abolish tax on savings income at the basic rate in this spring's Budget.
In the short-term, it helps the innocent victims of the recession. In the long-term, it encourages saving and eliminates the double taxation of savings as recommended by the Meade report 30 years ago.
But there is clearly much work to do.
In summary, we need a radical shift, from short-term decisions to long term reform that can mend our broken banking system, restore our broken public finances, and radically rebalance our economy to give us a springboard for recovery.
The thread linking these three challenges is the need for greater responsibility: in financial services, in government borrowing, and in economic development.
We cannot return to the capitalism without a conscience of the past decade.
Instead we must build a new, moral capitalism where markets are the means to a better quality of life, not ends in themselves; where governments are responsible, and encourage responsibility; and where the country lives within its means.
We can build a stronger, safer, better future if we act now, and think now for the long term, and use this crisis to make the changes we need.
So work with us as we develop our plan for Government.
For this is no easy task. It will not be achieved if we work alone or are ill prepared.
But we must achieve it if we are to once again, leave a future for our children that is better than the one we live in today.