Anthony Browne is MP for South Cambridgeshire, the Chair of the Conservative backbench Treasury Committee and a member of the Treasury Select Committee.
“It’s the economy, stupid!”: the phrase at the heart of Bill Clinton’s successful 1992 election campaign in America may have become a political cliché. But like many clichés, its use lingers on because it contains a fundamental truth.
These are words the Conservative Party needs to remember as we plan for the next two years and the looming general election. A clear, concerted focus on growth and the economy would not just be good for the country, but good politically. It would help to relieve many of the problems the country has – or make it easier for the Government to sort them – and it would also help the Conservative Party hold together its new political coalition of red wall and blue wall.
When I stepped down as the Observer’s economics correspondent in 1999, it was in part because economics had become too predictable to be newsworthy, with growth and inflation steady.
There is no risk of that now. We have had unparalleled battering from many directions. The global financial crisis, the pandemic, and now the massive surge in global energy and commodity prices that has left the economy seriously wounded.
Even in this age of fury, most fair–minded voters think the Government has dealt with these shocks admirably. Rishi Sunak’s £400 billion support package during the pandemic drew international praise, with economists who appeared in front of us on the Treasury Select Committee falling over themselves to applaud it.
Last week’s support package for families facing the cost-of-living crisis won praise from a wide range of campaign groups who normally condemn the Government. But we are still left with the national debt and taxes at their highest since the aftermath of the Second World War – a risky economic position to be in, and a politically uncomfortable one for a party that claims to believe in low taxes.
The surprise for most economists, though, is how, given all the battering, the economy is not in worse shape than it is. We had predictions of unemployment rocketing up to 1980s levels – but it is now at record lows, with more jobs than jobless people for the first time ever. Unlike the 1980s, we retain many fundamental economic strengths.
But still the economy is very precarious. Stagflation looms. Quantitative easing is being unwound. The massive national debt makes us vulnerable to rate rises. The ageing population will steadily build up pressure to increase public spending.
The solution is growth. Higher economic growth – and higher productivity – leads to higher incomes, relieving the cost of living crisis. It would increase tax revenues and reduce welfare payments, improving the national finances, and give the Government flexibility to bring in much needed reforms. On average, one person going from joblessness to job improves the Government’s finances by £6,000 a year.
The western world has had sluggish economic growth for 15 years, and driving it up should now be the defining mission of this Government. It needs the policies to deliver it, and it needs to communicate it. The Chancellor set out the mission in his recent Mais lecture, where he laid out the strategy to deliver growth based on “a new culture of enterprise”.
His focus was on what he summarised as “Capital, People, Ideas” – encouraging investment, increasing skills and training, and promoting research and development. His central thesis is that the key to drive up growth is to increase business investment, where the UK lags most of the OECD.
That is why he introduced the temporary “super deduction” tax relief on it, and is now consulting on what to succeed it with, to be announced in the Autumn budget. The 1922 Treasury Backbench Committee, which I chair, is currently gathering evidence from politicians, think tanks and business groups, on which reforms could help to promote growth.
There are many other Government policies that help to do so – from agreeing free trade deals, to investing in infrastructure such as new railways (the newly opened Elizabeth Line in London is an inspiration), introducing freeports, and dramatically increasing research and development funding.
The recent Queen’s speech was full of legislation that will help growth, from removing the ban on gene editing (important for businesses in my constituency) and removing red tape on trade documents to modernising business rates and making financial services regulation more competitive.
But clearly there is much more that can be done. As the editor of this site pointed out in Conservative Home last week, there are many sensible recommendations from the Taskforce on Innovation, Growth and Regulatory Reform that have not yet been implemented. We should use tax breaks to encourage regional development not just public spending.
Going for growth also needs a mindset change across Government. As one Cabinet Minister put it to me recently, the Treasury has never been interested in growth, just in collecting taxes. Many sensible tax reforms are undermined because the Treasury doesn’t fully assess their impact on longer-term economic activity – just on what first order impacts they would have on government receipts. All policies should be assessed across every Government department on what impact they would have on growth, and those that are beneficial should be prioritised.
The Government also needs to turn this into a compelling narrative that everyone can buy into. David Cameron and George Osborne repeated their “Long Term Economic Plan” so often they got ridiculed, but it won them the surprise 2015 outright election victory.
We now need a similar clear plan. Cabinet ministers should mention it in every speech. Every MP should know instantly when asked in TV interviews what the key mission of the Government is: growth. Every civil servant working on a policy should know what the overarching priority is. The whole country should know that is what the mission is.
The Prime Minister is instinctively pro-business, but business clearly needs to be persuaded. The Government needs to ramp up the case for free enterprise and business, and to push back against more statism being the answer to every problem. We need to turn our rhetoric about being the party of low taxes into reality. The public will not believe us if we say we want low taxes when they are at their highest since the Second World War. With the budget deficit shrinking fast, the Government can soon start cutting taxes; a faster growing economy will make it easier to cut them further.
Having a clear mission on growth is also good politics. In its bid for the middle ground, the Labour Party is trying to position itself as the party of low taxes and of business, but that puts the political frontline on our natural territory. Just as Conservatives can’t win a bidding war on spending, Labour can’t win a bidding war on growth. Labour can’t stop thinking about how to cut the pie, rather than making it bigger.
Growth can also bridge across the new political coalition. Many other policies that might appeal to Red Wall voters – such as the Rwanda asylum policy, dialling down on net zero or stoking culture wars – risk alienating more liberal Conservative voters in the south.
But a clear mission to promote growth, help business, and cut taxes while balancing the budget appeals to both wings of the party, and can unite it rather than divide it. Being economically liberal and fiscally responsible is the clear political middle ground. When it comes to what the Conservative mission should be until the election – it’s the economy, stupid!