These ideas were well understood in the years running up to the 1979 election, not least because they had been implicit in the International Monetary Fund's programme for the restoration of the UK's solvency in late 1976. In 1980, the Chancellor of the Exchequer, Geoffrey Howe, translated them into a control framework known as the Medium-Term Financial Strategy (MTFS). 

The strategy had two prongs, fiscal and monetary. Numbers were laid down for the budget deficit and the rate of money-supply growth for the four years to 1983/4. Both the budget deficit and the rate of money-supply growth were to be reduced, with the explicit aim being that the lower money supply growth would lead to much less inflation than in the 1970s. As Mrs Thatcher herself made clear, the government was unequivocal in its determination to maintain the downward path for the deficits and money growth. Indeed, the MTFS was the most important policy expression of Mrs Thatcher's boast that "the lady is not for turning". 

Unhappily, the economic downturn of 1980 undermined tax revenues. By early 1981, forecasters expected the original MTFS target for the budget deficit to be exceeded by a wide margin. Almost all political commentators thought that the MTFS would be dropped and that the lady would turn, not least because of the prevailing Keynesian orthodoxy that action to lower the budget deficit would further deflate an economy already in recession. 

But the MTFS was retained and the lady did not turn. Howe raised taxes by three per cent of GDP in what may have been the most controversial budget of the 20th century. Two Cambridge professors organised a letter to The Times from 364 academic economists, forecasting that the increase in taxes would aggravate the recession, wreck the economy and cause social unrest. In fact, demand and output started to recover within a few months of the budget and the Thatcher government's reputation for sound public finances was thereafter never in doubt. The 364 looked ridiculous.

The MTFS, dropped by Gordon Brown when he became Chancellor in 1997, needs to be reintroduced. Osborne's speech to the Conservative Party conference was brave and admirable in its recognition that public expenditure must be reduced. But the Conservatives' reputation for economic competence would be further enhanced if they included plans for a new MTFS in their election manifesto.