Here is a story about how crude dogma and a factually baseless political attack line are wrecking the country’s future. Britain desperately needs investment, and with interest rates this low it would be economic madness not to borrow to fund it.

Even a Conservative cabinet minister such as Sajid Javid has broken ranks to demand £50bn of borrowing to solve the housing crisis

In the years leading up to the crash, rightwing outriders such as the TaxPayers’ Alliance, incensed at a Tory commitment to match Labour spending pound-for-pound, launched a campaign to demonise the notion of such public investment. They sought out horror stories of wasteful spending, of overpaid public servants, of failed state projects, all of which appeared designed to discredit the very notion of public investment.

When the crash came, the ideologues were triumphant and the Tory leadership revised history. The huge deficit wasn’t, according to this dishonest narrative, driven by a drop in tax revenues and the inevitable recession-induced increase in spending. It was instead caused by Labour profligacy making the nation’s money run out.

This package of lies delivered numerous political advantages for the Tories. It fulfilled crude partisan aims. Throughout the coalition’s tenure in office, polling showed that while public opinion disliked cuts, it blamed the last Labour government for them more than the Tory-led administration actually imposing them. Cuts were seen as sad but necessary, rather than ideologically driven.

‘The Tories’ economic strategy failed on its own stated terms.’ Then-chancellor George Osborne in 2014. Photograph: Stefan Wermuth/Reuters

Aided by Ed Balls’ concessions to the austerity narrative, the Tory mantra of “we’re clearing up Labour’s mess” acted like a ball-and-chain on confidence in Labour to run the economy, ensuring the party languished behind George Osborne in the polls. It had profound ideological gains too: shrinking the state makes the hearts of all true-blue Tories beat that little bit faster, even though – for a period – they were forced to pretend to abandon this objective.

Yet the Tories’ economic strategy failed on its own stated terms. A deficit we were told had to be eradicated by 2015 to stop Britain going the way of Greece will now, according to the Tories’ projections, remain until 2031. More than £700bn has been added to Britain’s pile of national debt since David Cameron entered No 10. Britain now has the weakest growth of any G7 country, having endured the worst slump in living standards of the 35 industrialised OECD nations other than the very bogeyman repeatedly conjured up by the Tories: Greece. But as a political device – until now, at least – it has been crudely effective.

And at such cost to the country. Britain has some of the worst regional inequalities in the western world, and they have only got worse. Spending on London’s transport per head is £1,500 higher than in the north. A housing crisis has locked much of younger Britain out of home ownership and, with the failure to build desperately needed council housing, a generation is driven into an unregulated rip-off private rented sector instead. And so – instead of money spent to build housing – over £9bn a year ends up subsidising private landlords instead.

We have a productivity crisis that only gets worse: last month, the Office for Budget Responsibility downgraded its forecasts. Britain remains pitifully near the bottom of the league table for government investment. If you need any proof as to how much of a con Tory austerity actually is, witness the way they have been trying to drive through a £4.7bn giveaway to banks by cutting the bank levy, while children’s services face crisis without an extra £2bn.

Labour is right, then, to boldly and unapologetically make the case for borrowing to invest. But at the next election, the Tories and their media cronies will far more obsessively zero in on Labour’s economic plans, not least given Jeremy Corbyn is likely to emerge from an electoral contest as prime minister. That’s why the debate has to be had – and won – now. Indeed, because the Tories’ dogma is so at odds with the nation’s needs, even a Conservative cabinet minister such as Sajid Javid has broken ranks to demand £50bn of borrowing to solve the housing crisis.

Labour’s own plans, as enshrined in the fiscal credibility rule, commit not to borrow for day-to-day spending. Indeed, it is notable that when John McDonnell was chair of finance at the Greater London Council in the early 1980s, he produced a balanced budget every year. Instead, the borrowing is earmarked only for any project with a clear economic benefit: such as energy infrastructure, or research and development. With interest rates at such historic lows, here is the dictionary definition of “no-brainer”.

There is an obvious counterattack to these proposals. What if interest rates jump? Here is an attempt to use an unknown to halt investment that would not only modernise the country, but fuel tens of billions of economic growth. For example, Labour estimates that its plans to build a “Crossrail for the north” would cost £10bn in borrowing: but the Transport for the North body believes such a project would help deliver £85bn of desperately needed growth in northern England. The electrification of the entire Great Western Railway would cost £700m, but – according to the Department of Transport – the economic benefits could be worth two and a half times that. And that’s the point of investment, of course: the economic returns, and the increased tax revenues, dwarf the costs, and – critically – the cost of servicing the debt.

Housing is an obvious win-win example. Spending on a mass house building programme will slash the billions spent on housing benefit; create skilled, properly paid jobs – thereby reducing the amount splashed out on in-work benefits; produce an economic multiplier effect, with every £1 spent on housing generating an estimated £2.84 in economic output; and boost a range of industries dependent on housebuilding.

With their ideological zealotry in rolling back the state, the Tories have disastrously held back the country’s development. Add the bungled Brexit approach, and Britain risks becoming the sick man of the western world: in growth, productivity, living standards, you name it. The onslaught in a short election campaign against Labour’s desperately needed proposals will be brutal and unrelenting. But Labour must win the argument. The alternative is another generation of stagnation and decline.

• Owen Jones is a Guardian columnist