We have won the argument in favour of fiscal responsibility

George Osborne said that our approach to dealing with the recession has been vindicated in a speech to the Royal Society of Arts.

The Shadow Chancellor made clear that he and David Cameron had consistently argued against Labour's policy of trying to borrow our way out of debt, describing it as an "irresponsible course of action".

He pointed out that at first, "we were almost alone in making this argument" - but stressed that "informed opinion has turned in our direction":

"The Governor of the Bank of England made it crystal clear that he agrees with our position that Britain cannot afford a second fiscal stimulus, and today even the Prime Minister appears to be in full retreat. The forthcoming Budget will mark the collapse of his strategy for dealing with the recession."

George said the Budget will vindicate "the principle of fiscal responsibility that we Conservatives have stood by in good times and bad."

And he stressed that the view that the current financial crisis heralds the end of market economics is "profoundly mistaken" and needs to be "confronted and defeated".

Read George's speech in full: Policy making after the crash.

Watch George being interviewed by Matthew Taylor, Chief Executive of the RSA, after his speech this morning.