Let’s start by agreeing that we don’t want to be where we are. That’s to say, with a record post-war tax burden and squeeze on living standards, yet with rising debt and no prospect of a balanced budget. This is the politics of the ever-bigger state – after four terms and twelve years of Conservative-led government.
Richer people pay more tax than poorer ones (some of whom don’t pay any income tax at all), so it is they who must pay for most of this approach – especially if they work in the private sector, where pay is still lower and pensions less secure. No wonder the Daily Telegraph and GB News are raging.
You can’t blame them. But what alternative policy would offer tax cuts? Printing the money to fund government spending instead? Not unless you want inflation to rise in 2024 from its expected 9.1 per cent next year rather than fall. Or yet more borrowing without less spending, because faster growth will fund the revenue required?
Liz Truss tried it. The result was a surge in gilt yields and a threat to pension funds, because our economy is not set up for the interest rates that such a policy would now bring. Her approach would have brought deeper recession still. Though for the right-wing entertainment industry, which is urging a re-run, this discredited policy still makes a good column.
Jeremy Hunt was right to point out in the Autumn Statement last week that “government borrowing has fallen. The pound has strengthened. And the OBR says today that the lower interest rates generated by the government’s actions are already benefitting our economy and sound public finances”.
But Conservatives shouldn’t simply shrug our shoulders, and settle for a bigger state and higher taxes The solution is simple though not easy: if government can’t print or borrow, then it must spend less. Britain must learn once again to live within its means.
At which point, some on the right call for savings to come from less waste and bureaucracy, which makes sense up to a point. But the uncomfortable truth is that, with public spending at over £1,000,000,000,000 – that’s a trillion pounds, thank you very much – the necessary reductions can only come from radical reform to the state rather than populist tinkering.
In a nutshell, a lower tax burden requires less government supply. And less government supply is impossible without less voter demand. As Peter Franklin pointed out recently on this site, attempts in America to “starve the beast” haven’t worked. If voter demand for more government remains constant, the money to fund ends up borrowed rather than taxed.
Let’s be frank. Those four terms of Conservative-led government have failed to reduce the demand for government. Doing so was just about the last thought in the mind of Boris Johnson in 2019, so Rishi Sunak is saddled with a manifesto that promised more spend, spend, spend – 50,000 more nurses, 50 million more GP surgery appointments a year, 20,000 more police.
How might the Conservatives plan to reduce the demand for government? They could start by taking an unsentimental look at modern Britain. Like other western countries, we have a relatively low birth rate, which means a hard choice for funding the staggering sum above: either working for longer or importing more labour.
In the ideal world that doesn’t exist, our birth rate would be higher, with more people requiring less help. The “five giants” identified by Iain Duncan Smith and the Centre for Social Justice would be smaller: there would be less family breakdown, worklessness, serious personal debt, addiction and educational underachievement.
The best means to that end is the proven one: stable families, better schools, good jobs. Families that are stable need less support from the state. Better schools help to raise life chances, though education is also an end in itself. Good jobs mean higher wages and less taxpayer dependency.
Whether planning for a fifth term or in opposition, the Conservatives should think very radically. The conventional solution to more stable families is more marriage. But more babies were born to unmarried mothers in England and Wales last year than to married ones for the first time since records began.
So how might couples, families and households be incentivised to better pool their income? Might allowing them more childcare choice take the pressure off early years provision? Could the tax system be used to encourage older people to live with their children, so relaxing the burden on care homes? Isn’t there a leaf to be taken out of Asian families’ book?
As for schools, what’s happened to the Gove revolution since he left office? If Conservatives are unhappy about a drift to woke in schools, the answer is unlikely to be another “government crackdown”. Better for new ones to thrive that parents can choose for their children. Scaling up Michaela ought not to be mission impossible.
There is a case for an experiment with grammars in poorer areas where education is failing. And, turning to work, Tories should want to shift the balance in higher education from the academic to the vocational. Nor can they forever avoid facing up to one of the biggest contributors to a poorer economy and family disruption: the housing crisis.
This takes us to the political crunch. The Conservatives are increasingly the party of older, less educated, asset-rich people. The politics of this development may be electorally sustainable for the Party. The economic implications for the country are not. The state pension triple lock is unsustainable.
The demand for healthcare and pensions from an ageing population can’t be reduced. But can more of it be shifted from the taxpayer? Is it time to revisit the Cameron-era interest in co-ops and mutuals? James Cartlidge argued recently on this site that the growing number of people using private health make tax breaks for using it politically sustainable. Could he be right?
All this is only the outline of a sketch. But a full programme is unlikely to be different in one respect: every interest group in the conservative movement will have to make concessions to the other ones. The Tory Left, tax breaks for private care, say. The Conservative Right, big tax cuts later, not now. Libertarians, the primacy of family, not individuals. Everyone, the triple lock.
Over the next few months, ConservativeHome will return to reducing the demand for government. And though Britain’s skies are dark, the conservative movement’s are less so. It seems to me to be in a much better place than in 1995, the last time that the Tories faced a poll deficit on the present scale.
The Centre for Policy Studies was a shadow of its present thriving condition then. There was no Policy Exchange. Duncan Smith had not yet dreamed up the Centre of Social Justice. But there is more to life than think tanks. UnHerd has become a must-visit for post-liberal discourse. There is Munira Mirza’s new project for better political leadership, Civic Future.
Those last two ventures are not, strictly speaking, part of the conservative movement at all. Rather, they are, as Civic Future puts it, “grounded in the ideas and values that underpin liberal democracy”. That’s a reminder of the gulf between the woke minority and the majority elsewhere: the latter believe that western civilisation has produced more deserving of pride than shame.
At home, the right’s short-term prospects are bleak, but its medium-terms ones less so. In America, Trump’s favoured candidates did badly earlier this month and mainstream Republians rather better. Strange as it may seem, I’ve seldom felt so hopeful. There is nothing in life like starting again.