Jill Kirby: On Tuesday, the Chancellor passed up the opportunity to present a radical new path to economic growth

In the spring of 2010, commenting on the Conservatives' timid and lacklustre election strategy, Fraser Nelson made a prediction that has now been fully realised. In a lecture (pdf) to the Centre for Policy Studies, the Spectator Editor warned that Gordon Brown would govern Britain “posthumously” until at least 2020. As George Osborne sat down at the end of his Autumn Statement on Tuesday, any lingering doubts about the truth of Fraser's vision were well and truly dispelled.

Across the media, even at the BBC, this mini-budget has been characterised as Brownite. The handful of Conservative commentators who consider the Chancellor is making the best of a bad hand, such as Anthony Browne in this slot yesterday, admit that the comparison with Brown is apt, although they blame circumstances beyond Mr Osborne's control. Most of the Conservative press is less generous, dismayed by both the tone and content of the Statement.

Expectations had certainly been managed in advance. From all the pre-announcements it was pretty clear to anyone hoping for a radical response to a dire economic situation that they would be disappointed. As Tim Montgomerie put it (making his own addition to the political lexicon) the Statement was mostly “tinkery.” Having remarked on the shades of Brown in the 2011 Budget I had managed my own expectations down to a pretty low level. Even so, I found some of the Chancellor's announcements both surprising and dispiriting: mis-selling institutional childcare for two-year-olds as “pre-school education” whilst also trying to claim it will get more mothers into work. Or hiking pension tax credits whilst cutting allowances for older savers. Then the freeze on working tax credits (which require recipients to work) while increasing child tax credits (which carry no work requirements). And desperately trying to mitigate the effects of rampant inflation by pegging prices of rail fares and giving voters in the south-west a £50 handout to pay their water bills.

Anthony Browne believes that this kind of activity and managerialism reassures the country in anxious times. Looking at yesterday's headlines, I'm not so sure. I suspect that the bleakness of the overall forecasts will have such a depressing effect on confidence that all the tinkery will be in vain. This is surely the moment for a radical downsizing of the state and recasting the role of the public sector. If not now, when? Attempts to clear the structural deficit by simply slowing the growth of public spending have failed, forcing the Chancellor to contemplate real-time significant cuts over a much longer period (and to have those cuts hanging over the country at the time of the next election). As the economy deteriorates, and in the (increasingly likely) event that the Euro collapses in the messiest way possible, George Osborne will have no choice but to make more and bigger cuts. Yet he has failed to make the political or rhetorical case for shrinking the state. His case for deficit reduction has always rested on the bare, utilitarian argument that Britain's ability to fund its debt rests on bond market perceptions of an austerity strategy. Quite apart from the risk that this perception could be badly dented by the OBR's latest figures, this “one-club” approach is simply inadequate to explain the kind of downsizing that should now be taking place right across government departments. Expectations of what the state can or should fund must be downsized too.

As many of us on the centre-right argued in the run-up to the last election, Blair and Brown proved beyond all doubt that more spending does not mean better services. Yet, as Fraser so cogently pointed out at the time, David Cameron and George Osborne were so ensnared by Labour traps that they never managed to set their own terms of debate. In pledging to protect the health and overseas aid budget Conservatives conceded that spending more showed that you cared more. Their adoption of the 50p tax rate demonstrated their acceptance of the Labour proposition that paying a greater share of your income to the state is inherently virtuous.

Perhaps most significant of all was George Osborne's oft and still repeated insistence that he would not contemplate “unfunded tax cuts.” The concept of an “unfunded” tax cut was a Brown masterstroke, first wheeled out by Gordon in 2006 and so successful that the Conservatives, rather than challenging the concept, quickly adopted it. So embedded has the term become that it's rare to hear Mr Osborne mention tax cuts without describing them as “unfunded.” In embracing this particular Brownian myth, the Chancellor has cut himself off from a stimulus to growth that would now be far more useful than all his micro-interventions and petty subsidies.

As Labour and Coalition deficit reduction targets converge, the Balls critique of “catastrophic” government austerity is just pantomime. As other commentators have pointed out, there is precious little to choose between the Brown/Balls spending plans and those of the Coalition. But George Osborne should be seriously worried by this convergence. Instead of trading compliments with Mr Balls on the Sunday morning TV sofa, he should be aggressively challenging Labour's definition of the size and role of the state.

The failure of Conservatives when in opposition to set the terms of debate has cast a long shadow over their ability to govern. Whilst compounded by the constraints of coalition, it is a shadow of the Conservatives' own making. This autumn, as all the forecasts unravelled and the economic picture darkened, against the backdrop of chaos in the Eurozone, there was an opportunity to break free of Labour's mindset and to offer a radical new path to economic growth and smaller government. The Chancellor has passed up that opportunity. Gordon Brown is not, after all, sulking in Fife, but alive and well in Downing Street.