What with all that unnecessary fiddling with camels and eyes of needles, it is far easier for a rich man to enter the House of Lords than the kingdom of heaven. The voters long ago cottoned on to the sulphurous nature of the transaction between politicians and those lusting after honours. At the very least, they are entitled to expect that the seller cuts them in on the deal.

Lord Ashcroft, however, got rich by having an eye for a bargain. The billionaire, who saw that the Tories led by William Hague after the 1997 election were near-bankrupt, was keen to secure a seat in the upper house. He gave undertakings that were understood to mean he would pay British taxes in full. Had the Tory deputy chairman indeed paid his full whack and not exploited a loophole in his deal, the state’s depleted coffers would be £127m to the better; but he avoided tax on his foreign income. In an age of austerity, PAYE taxpayers can look upon these arrangements only with sullen distaste.

Before Michael Ashcroft came clean last week, David Cameron had two opportunities to put the matter behind him. He could have asked questions about Ashcroft’s status on becoming leader. And after the expenses scandal broke last year, when the Tory leader won acclaim for telling his MPs who had abused the system to pay the money back, he had an ideal opportunity to get the moneybags to fess up.

Most people by then had guessed what Ashcroft was up to anyway: Sir George Young, shadow leader of the House, told Newsnight last month that Ashcroft was a non-dom. But Cameron chose not to inquire too closely and left it to a freedom of information request to force the matter out into the open. The odium therefore falls on him.

Ashcroft and his equivalent on the Labour benches, Lord Paul, the privy counsellor, are but the most glaring beneficiaries of our degraded honours system: the latter, as this newspaper recently revealed, adds insult to injury by playing fast and loose with his parliamentary expenses. But the entire edifice is riddled with rot. Sir Philip Green, the clothing king, for instance, is able to pick up a knighthood for his services to the retail industry while putting his investments in the name of his wife, a Monaco resident, thus avoiding millions of pounds in tax.

Peerages are becoming devalued currency. Stephen Carter, a former Brunswick public relations man, was oversold by Sarah Brown as a wonder worker to save her husband, the prime minister. Within months he was discarded as communications supremo by No 10 — according to a new book by Andrew Rawnsley, the guileless emails he sent to his boss were, unknown to him, automatically copied to aides throughout the building. After a short stint he was granted ermine, became a minister and resigned again. Still, nothing lost, much gained. Carter’s business cards now proclaim he is a titled lord.

A clean-up of honours and political funding should be simple. If the state really feels the need to bestow honours, only people who pay British taxes in full should get them.

The political parties cry that they couldn’t function without the help of rich men: the only other course is to subsidise them through the taxpayer. Complete tosh. Countries such as Germany, where the political parties take far more state money in the preferred “progressive” manner, have seen wholesale corruption. In America, which relies on political donations, the numbers of individual givers have increased. If taxpayers need encouragement to pay for political parties, small donors could be incentivised through the tax system.

The world-weary say the Ashcroft affair doesn’t matter: the voters believe all politicians are cheats. The Sunday Times poll today reveals that the Tory leader’s ratings are down for the first time in two years. Fewer than 50% think he is doing a good job. Until recently his ratings were stratospheric. Pure coincidence?

As the cynical Frenchman put it, Cameron has not committed a crime; he has done something far worse: he’s made a mistake. The voters may have written off the moral credentials of the current crop of politicians but they do require basic competence. A stream of negative headlines in the newspapers shows a lack of grip. “This has operational consequences,” argues a former Tory minister. “Cameron and Hague are putting on a Laurel and Hardy show when we should be looking to the size of our majority.” Sixty days before a general election is not the time to be having a row about party funding and the influence of unelected rich men.

A member of Team Cameron argues with ruthless reasonableness: “Why didn’t David just take Ashcroft out and shoot him? His work is done. What’s the point of him hanging about?”

That said, you can see why the Tory leader prized Ashcroft. He is feared by Labour precisely because his contribution to the Conservative cause has been so sensible. The deputy chairman gave unflattering advice to a series of Tory leaders: their offering just wasn’t appealing to floating voters. He also focused his attentions on the marginal seats that win elections. But now he is an embarrassment. Cameron is expected to be ruthless with those who let him down: sunnier than Gordon Brown but not softer. Ashcroft has made him look weak. Cameron has calculated that the story will not run. His deputy chairman will be allowed to hold his post until the election. That’s some gamble.

Hague, Cameron’s trusted deputy, has damaged his reputation too. He really is the last of a dying breed of witty, literate politicians that is supposed to have passed with the death of Michael Foot. He is an accomplished biographer and orator and an ornament to his party.

The former Tory leader delighted connoisseurs of parliamentary debate last week with his duel with Harriet Harman, leader of the Commons. She charged that Cameron should sack either Hague or Ashcroft because they could not both be right about the promises made when the deputy chairman received his peerage. The real party funding issue, riposted Hague, was the power of the Unite union, whose deputy general secretary is Harman’s husband: “He has just gone through an all-women’s shortlist to be selected for parliament.” How everyone laughed. As he did in many jousts with Tony Blair, Hague won the debate in the House but lost the argument in the country.

The Conservatives desperately need to get back on the front foot with a positive message to the voters. Too often they come up with initiatives but then let them drop. A fortnight ago George Osborne, the shadow chancellor, revealed to this newspaper a scheme to sell off the state’s holdings in the banks on cheap terms to voters. Who has heard about it since?

The Tories designated the past seven days “education week”: yet their eloquent spokesman, Michael Gove, was strangely given the task of defending Ashcroft. When he was a journalist at The Times, Gove dealt with Ashcroft as a picador does with a bull.

Even the Tory tough message on the national debt could be presented more attractively. If the public is worried about an age of austerity, why not cite the cuddly former president Bill Clinton’s achievement in balancing America’s books. Sweden and Canada, two cosy political cultures, have managed deep cuts without social dislocation.

One thing to note: Lynton Crosby, the Australian election campaigner, is back in the country. He masterminded Boris Johnson’s mayoral campaign for London as well as Michael Howard’s failed general election campaign in 2005. “I wouldn’t be at all surprised if he were to be recalled to duty,” says one insider. “Say what you like about his political agenda, when he pulls the trigger, the bullet comes out the other end.”

Last week Cameron’s gun jammed and Ashcroft lives to tell the tale. Cameron’s marksmanship must improve.