ConservativeHome's ToryDiary

The good, okay and ugly guide to Conservative economic policy

The main story in The Sunday Telegraph focuses on calls by "Leading Tories" to end Labour's "overtaxing, overborrowing and overspending".  Lord Forsyth, John Redwood and CentreRight's Simon Chapman are all quoted.  We have long argued that George Osborne was wrong to match Labour's overspending but public expenditure is only one ingredient of economic policy.  What does the rest of Tory growth policy look like?  Here's our good, okay and ugly guide to where we are...

GOOD

Monetary policy: The Conservatives will strengthen Bank of England independence.

Free trade: The Conservatives are probably the most anti-protectionist party in Europe.  Long may that remain so.

Long-term bills: The Conservative Party's social reforms - reducing welfare, strengthening the family and reducing drug dependency - should deliver progressive reductions in the demands on the welfare state. The reforms will also encourage economically and socially creative citizens.

Education and skills: Far too many children in Britain are trapped in underperforming schools.  Michael Gove's Swedish-inspired revolution will start to change that.  Also welcome are Mr Gove's concerns about science and maths teaching and John Hayes' work on skills.

OKAY

Taxes: This ingredient almost deserves to be in the ugly category but for some interesting ideas on tax simplification and promises on stamp duty, inheritance tax and the adoption of Andrew Lilico's Fair Fuel Stabiliser.  The overall picture, however, is that Brown has levied 100+ extra taxes, many falling most heavily on the poor.  The Tory response is timid.  This timidity flows from a white flag policy on supply-side economics (ie rejecting the fact that certain tax cuts at least partially pay for themselves by generating growth and discouraging avoidance) and more importantly adherence to Labour's spending plans (see below).

Regulation: We can hope that Conservatives will operate a lighter touch and even adopt some of John Redwood's reforms as set out in his Competitiveness Report.   Also welcome are Tory ideas to undo some of the damage done by Gordon Brown's financial regulatory regime.  What we don't need however are headline-chasing announcements like the one on Chapter 11 bankruptcy.  Chapter 11 stops bad companies from failing (customers of US airlines will know what we mean).

UGLY

Transport: Theresa Villiers has been congratulated by others (Charlie Elphicke and Dan Hannan) for her campaign against the BAA monopoly but overall Tory transport policy  is disappointing.  On Radio 4 last Saturday Ms Villiers said that the party will have radical ideas by the time of the General Election; including on high-speed rail.  Let's hope so.

Energy: Alan Duncan should be commended for forcing the party to abandon its 'nuclear energy is a last resort' policy but there's little sense of urgency from the party leadership about Britain's looming energy crisis.  A few micro generation projects will not be enough to keep British industry going.

Public spending: This is the ugliest of our economic policies.  Conservatives should not be pledging to continue the biggest ever peacetime increase in public spending when ordinary Britons are having to cut their own budgets.  A flexible freeze on public sector recruitment, scrapping of centralised IT projects, abolishing ineffective quangoes like the RDAs and market-based reforms of the public sector could all be introduced to start bringing spending under control.  Dan Lewis has suggested other disciplines.

Osborne: On fairness, “it is the right in British politics which is now making the running”

George Osborne’s speech to Demos today tackled a number of major themes, tying all together to a Conservative notion of fairness. Following the release of the Unfair Britain dossier (PDF), the speech  set out the party’s vision of a fair society and how to achieve it. The content was striking in places for its intellectual self-confidence in meeting and tackling head on the left’s principles. Some highlights:

Reliance on the state: “At the root of the left’s failure on fairness in government is a stubbornly-held by severely mistaken belief, best expressed in Gordon Brown’s assertion that “only the state can guarantee fairness”. It is a belief with which I profoundly disagree, and a belief which helps explain how so much money could have been spent in the last decade, but so little achieved.” He noted that since 1997 education spending has doubled and NHS spending tripled.

The three characteristics of a fair society: “on each, it is the right in British politics which is now making the running”.

1. “… people are properly rewarded for their effort and ability”. Notably, Osborne did not start by defining fairness in terms of the disadvantaged.
2. “… equality of opportunity, so that people can achieve their aspirations regardless of their background and no one is left behind. And I believe here in Britain my party is now winning the argument that the progressive goals of reducing poverty and increasing mobility are best achieved by Conservative means”.
3. “ … the current generation should not saddle the next generation with the costs of its own mistakes, be they environment, social or fiscal”.

James Purnell steals Chris Grayling's ideas on welfare

James Purnell likes a bit of Photoshopping and we thought he might like the poster below.  The Welfare Secretary's welfare ideas were meant to be launched on Monday but they've already been leaked to Sky.  We should probably welcome the new bipartisanship on welfare (as Coffee House has done) but we have a sneaking feeling that Labour just won't implement the ideas properly.

Grayling targets English language skills of unemployed minorities

In a speech today Chris Grayling, Shadow Secretary of State for Work and Pensions, will lay much of the blame for Britain's large pool of unemployed, unskilled labour on Gordon Brown's immigration policies:

"I think Gordon Brown has used the influx of migrant workers as a way of ducking the issue of welfare reform, and as a result, has left millions of people stranded in poverty who could and should have been helped back to work over the last decade. After all his rhetoric on poverty, he has failed to deliver the sea change he has promised. And immigration has provided him with a safety net for the economic impact of that failure."

Mr Grayling will also target the high proportion of UK ethnic minorities who are out of work.  "Speaking English," reports The Telegraph, "will be an "essential" requirement, with job centres and voluntary groups offering language lessons to those whose prospects are hampered by an inability to communicate."

Young people will be required to attend employment 'boot camps' after three months on benefits.  Mr Grayling will speak to the Centre for Policy Studies later today and is expected to say: "There is no excuse for a young, able-bodied person to be outside the labour force."

These latest announcements follow a series of other welfare reform proposals in January.  Savings from reducing welfare dependency will be ploughed into eliminating the couple penalty in the benefits system - a penalty that discourages poorer parents from living together.

George Osborne sets out five hopes for Darling's first Budget

In an article for The Sunday Times, George Osborne sets out his five hopes for Alistair Darling's Budget, due to be delivered in three days' time:

1. A restoration of stability to the public finances.  This will necessitate independent evaluation of tougher fiscal rules and spending control over the course of the whole economic cycle.
2. Lower taxation of businesses.  Britain has slumped from the 4th best corporate tax regime to a lowly number 19 in Europe.  Corporation tax should be reduced to 25p; paid for by scrapping complex capital allowances.
3. A reversal of course on CGT and non-dom taxation.  Instead, Darling should adopt the less intrusive Tory plans for the taxation of non-doms and eliminate stamp duty for nine out of ten first time homebuyers.
4. No more stealth taxes.  We need an end to the Budgetary small print that is corroding public trust in politics.
5. Fund welfare-to-work programmes.  This will deliver long-term savings to the taxpayer and reduce child poverty.

Mr Osborne does not mention his proposal - from Friday - of a shift in duties on alcohol or ideas on green taxation.  Other Sunday newspapers are reporting that Mr Darling intends to raise the overall taxation of alcohol and on gaz-guzzling new cars.

11.45am: Just caught up with George Osborne's Andrew Marr interview from this morning.  Mr Osborne said that he didn't have a principled objection to higher taxation of dirtier cars and alcohol but these should be 'replacement taxes' that would fund other tax cuts of equal size.  Stephanie Flanders, the BBC's new economics editor, offered a depressingly biased comment at the end of the programme - offering sympathy to George Osborne for his difficult task of controlling spending as tightly as Labour.  Margaret Thatcher struggled to match such stringency she told viewers.  No Stephanie.  The TaxPayers' Alliance have already shown that the Iron Lady was very good at controlling spending.

We'll make British poverty history, say Cameron and Grayling

We won't say much more about the Tory welfare reform package as here on incapacity benefit and here on the Jobseekers' Allowance we have already said quite a bit but a few headlines from this morning's Brixton press conference...

David Cameron said that welfare reform was not complicated.  It was essentially about the idea that people who could work, should work and  that those who couldn't deserve society's full support.

The Tory leader said that there were plenty of jobs available in Britain.  He pointed to vacancy rates and the inflow of foreign labour as proof of his statement.

Because the Tory approach was based on successful models from around the world this was why, he said, that it was "change you could believe in" - quoting Barack Obama.

Mr Cameron concluded his remarks by inviting Gordon Brown to take up the Tory proposals and he promised to work with the Prime Minister in implementing them should he choose to do so.

Chris Grayling then highlighted the four reasons why the Tory programme was much superior to Labour's existing approach:

1. SCALE: All 2.6 million incapacity benefit claimants would be assessed, for example, whereas Labour was only assessing new claimants.
2. SANCTIONS: There would be loss of benefits for repeatedly declining job opportunities or for a two year period of worklessness.
3. MANDATORY WORK ELEMENT: For all JSA claimants who had been claiming for two years.
4. FINANCIAL CHANGES: Savings from reduced benefit claims would immediately be channeled into funding successful back-to-work programmes.  The private and voluntary sector operators of back to work schemes would only be paid in installments and those installments would be subject to the previously unemployed remaining in work.

During questions ConservativeHome raised the issue highlighted by Dr Rachel Joyce in one of the weekend threads.  Rachel had written:

"As regards incapacity benefit - the regular medical checks need to be performed by independent doctors. GPs will tell you that they find it very difficult to say no to patients when they ask for sick notes - because of their doctor-patient relationship."

Chris Grayling confirmed that the medical examination would be independent although a GP's opinion would be available to the assessor.

Interestingly the questions from the press were largely of the 'is this tough enough?' variety.  Perhaps the mood has shifted in Britain and there is a real appetite for reform.

Before the press conference David Cameron spoke to participants in GAIN, a Tomorrow's People project that you can read about here.  In the New Year's Honours Debbie Scott of Tomorrow's People received an OBE.  Few people are more deserving of an honour.

Tories to impose two year limit on Jobseekers' Allowance and then it's workfare

Over the last few days Chris Grayling and David Cameron have been unveiling tough-love policies on welfare.  We've already had announcements to reduce the number of incapacity benefit claimants by introducing compulsory medical testing and also a requirement for single parents to undertake part-time work once their youngest child reaches school age.

Yesterday we learnt that the party will introduce a 'three-strikes-and-you're-out' policy on job offers for unemployed people.  The FT reported:

"Mr Grayling proposes that a claimant would lose one month’s out-of-work benefits for turning down a reasonable job offer and three months’ for turning down a second offer.  “If they refuse a third reasonable offer, they will be excluded from receiving further out-of-work benefits for a period of up to three years,” he said."

This morning, at an event in Brixton, the Conservative leader will announce the most radical step yet.  In an initiative based on the welfare model pioneered by US Republicans - and signed into law by Bill Clinton - the Conservatives will introduce a two-year maximum limit on being able to apply for Jobseekers' Allowance.

Significantly the two-year limit will be a cumulative one.  A claimant won't have to have been claiming JSA for two consecutive years but will find that a pattern of sporadic claiming will add up to a ban on further claims.  This part of the Tory package is designed to capture those people who seek to work the system by taking jobs for short periods but then quickly resign from them.  The Telegraph reports that more than a quarter of those who go into work from JSA are back claiming within 13 weeks.  Two-thirds of all annual JSA applications are repeat applications.

Once the two-year limit has been reached claimants will be required to undertake community work programmes such as removing graffiti or cleaning parks.

Speaking to the Daily Mail Chris Grayling, Shadow Secretary of State for Work and Pensions said:

"Staying at home will no longer be an option.  We have an absurd situation under Gordon Brown where millions of people are coming here to work while millions of Britons are allowed to remain on benefits.  We now know that four out of every five jobs created under Labour have gone to foreign workers. That's a culture that has got to change."

ConservativeHome will be at this morning's launch press conference and will report more afterwards.

Labour will attempt to attack the Tories on these policies but the man who would be expected to front those attacks - Peter Hain - may be a little distracted this morning.  The Guardian reports that the former deputy Labour leadership candidate failed to declare tens of thousands of pounds he received for his campaign.  Guido has more.

Cameron promises News of the World readers that he'll take 200,000 people off incapacity benefit

In an article for today's News of the World David Cameron promises to end the "something-for-nothing culture" that Labour has failed to tackle during its ten years in power.

The Tory leader says that he is particularly concerned that one-in-five of the 2.6m incapacity benefit (IB) claimants are under 35:

"I don't believe that there are nearly half a million young people in Britain with a disability which prevents them from doing any work at all."

The promise to "axe" 200,000 claimants doesn't appear in David Cameron's article but in a quotation from Tory Welfare spokesman Chris Grayling.  Mr Grayling tells the NotW:

"We know there are at least 200,000 people who should be moved straightaway from incapacity benefit and into jobs.  Over time there are another million who want jobs who, with help and retraining, will be able to find permanent work."

Given that there are 2.64 million people claiming IB at an annual cost of £12.65bn, the savings to the taxpayer would be about £1bn if 200,000 people were successfully removed from the system.  For the other million who need "help and retraining" the savings are more difficult to predict as the costs of easing them back into work will be considerable.

Writing for The Sunday Telegraph, Chris Grayling promises that every person currently on incapacity benefit will be interviewed and examined under a Tory government:

"The majority of people signed on to [incapacity] benefit by filling in a form and sending in a note from their doctor. Most claimants are then simply left to their own devices. We will change that. We will contact every single one of those 2.6 million people as quickly as possible. We will carry out face-to-face interviews with all of them, to assess what they can do, and how we can help them back into work. It's a big task, and it won't be done overnight, but it has to be done, and as rapidly as possible."

These medical interviews will establish whether the claimants are (1) not deserving of IB and should be on the Jobseekers' Allowance and subject to its different regime; (2) capable of some work but only with a lot more support; or (3) genuinely unable to work and deserving of long-term support from the taxpayer.

Work and Pensions Secretary Peter Hain has accused the Tories of plagiarising Labour plans but ConservativeHome understands that Labour only plans to examine new claimants - the Tories are much more ambitious in wanting to assess all 2.6 million people receiving IB.  Voters will also remember that Gordon Brown has already scuppered previous reform attempts by Frank Field in the early Brown-Blair years and more recently by John Hutton.  Labour enjoys little credibility on welfare.

A full guide to the Tory proposal can be found in this PDF.

David Cameron and Chris Grayling will formally launch the party's welfare ideas on Tuesday.  Today the incapacity benefits reforms are being trailed.  Over the next 48 hours expect more about some of the other ideas that ConservativeHome highlighted yesterday.

Cameron and Grayling to unveil welfare reform plans

Both the Telegraph and Times carry reports this morning about Tory plans for "radical welfare reform".  On Tuesday David Cameron is expected to announce a Green Paper that will include the policies summarised in the graphic on the right.

Many of these ideas come out of Iain Duncan Smith's social justice report and will now be developed by Chris Grayling, Shadow Secretary of State for Work and Pensions.

The Tories are thought to have decided against time-limiting benefits; a US-style reform that Frank Field regards as essential, according to The Times.

There are currently 2.6 million people on incapacity benefit and if the Government succeeds in its target of reducing that number to 1.6 million, the savings to the taxpayer would theoretically be £9bn.  But such savings are very unlikely, however.   American experience suggests that the long-term unemployed need costly assistance over many years as they move away from habits of worklessness.

The Conservative initiatives are welcomed in a Telegraph leader.  Even Simon Heffer is mildly encouraged but he calls for the Tories to go further still:

"If the Tories were to address all these factors - rigorously improving schools (including the expansion of grammar schools, which would have a trickle-down effect), demanding not merely stricter immigration controls but the expulsion of all illegal immigrants, removing benefits from all who refuse jobs and abolishing the minimum wage - then I would call for three cheers for Dave."

Earlier this week Migration Watch issued a report which found that "the effect of benefit levels combined with means testing of benefits for those who are working means that there is little financial incentive for people with families living on benefits to find employment."  Migration Watch continues: "This may partly explain why, despite there being 3.5 million people on Jobseekers Allowance or Incapacity Benefit, some 1.3 million immigrants have come to work in the UK in the past ten years."

Related links: Just before Christmas Chris Grayling spoke to Policy Exchange about his general approach to welfare reform and on today's Platform Ben Rogers discusses the extent of Britain's 'broken society'.

Grayling examines the problems with our benefits system

Highlights from Chris Grayling's speech on welfare reform to Policy Exchange this lunchtime:

No-one benefits from being on benefits: "For some there is no option. For some disability makes it impossible to work. For single parents with young, pre-school children, parenthood is a full-time job. For those people, our benefits system is a must. The help the state provides is a lifeline. That must never change. But for those who can work, in whatever capacity, the story should be very different. No one’s life is enhanced by being paid to sit at home and do nothing. The welfare state must, for most of us, be a safety net and not a way of life."

The nonsense of bringing migrant workers into areas with high levels of unemployment benefit: "I’m not one of those who believe that the welfare to work issue is simply one about benefit scroungers. The problems and issues are far deeper than that. But it is a complete nonsense to have an area like the West Country with amongst the highest levels of young people not in education, employment or training when local businesses have to import the labour they need from overseas."

Running a bit late on getting people off incapacity: "We have 2.7 million people on incapacity benefit. Ministers privately admit that a large proportion of them could work. But the support programmes they have set up, particularly Pathways to Work, will only apply to new claimants and a tiny proportion of the existing ones. Yet Ministers still have a target of getting a million people off incapacity benefit by 2016. At the current rate of progress, they are running 25 years late."

188 policy ideas to tackle poverty

Just returned from the press conference at which Iain Duncan Smith and his team of policy advisers presented the Breakthrough Britain report.  You can access a full copy here.  Perhaps inevitably the journalists' questions focused on the proposal for a tax break for married couples.  My guess is that this one recommendation will dominate the rest of the day's news cycle.  Here are my own contextual thoughts:

• The financial support for married and two parent couples is important because there are currently penalties for couples who live together and get married.  These penalties may not affect the lifestyle decisions of comfortably-off people but they matter when you are struggling to make ends meet.  We should not only look at these issues through middle class eyes.
• Breakthrough Britain does not pretend that a tax allowance alone will repair marriage.  Unlike previous Tory policies on families there are many other pro-family proposals including recommendations to review family law, provide couples with relationship education, Frank Field's option of frontloading child benefit, more help for carers and Cabinet-level representation for the family.
• The family breakdown section of the report is just one of six sections.  Breakthrough Britain is clear that we won't tackle poverty unless we also tackle the problems of addiction, indebtedness, worklessness and educational failure.  The sixth section focuses on the voluntary and charitable sector and its role in building 'the nation of the second chance'.
• Some of the best policies in the report are, for me: extension of the right-to-buy, simplification of child benefit, requirements for lone parents to be available for undertake 20 hours of work when their youngest child reaches five, payment of welfare-to-work providers according to results-based contracts, premium pay for inner city teachers, 'Pioneer Schools' free of LEA control and based on the US charter schools model and with funding voucherised, stricter classification of cannabis, a move towards abstinence-based drug rehab, measures to strengthen credit unions, greater funding of debt advice services, financial education for 14-year-olds, simplification of Gift Aid, a V-card reward scheme for young volunteers, the piloting of Community Growth Trusts (of which more soon) and fairer treatment of faith-based organisations.

In total there are 188 policy recommendations.  If you want to read them all please download this pdf.

Iain Duncan Smith set out the big picture ideas behind his report on YourPlatform earlier today.

Welfare is Labour's biggest failure

The Americans are celebrating ten years of welfare reform and they really are celebrating.   Signed into law by Bill Clinton (probably his greatest act) and drafted by Newt Gingrich's Republican Congress, the Personal Responsibility and Work Opportunity Reconciliation Act (1996) has had a transformational effect on American welfare.  These are some of the results as tracked by the conservative Heritage Foundation:

• "Overall poverty, child poverty, and black child poverty have all dropped substantially...
• Some 2.9 million fewer children live in poverty today than in 1995...
• Decreases in poverty have been greatest among black children... the poverty rate for black children is now at the lowest point in U.S. history....
• Hunger among children has been cut roughly in half...
• Welfare caseloads have been cut nearly in half and employment of the most disadvantaged single mothers has increased from 50 percent to 100 percent.
• The explosive growth of out-of-wedlock childbearing has come to a virtual halt."

Welfare reform is just one of the pillars of American compassionate conservatism that UK Tories should learn from.  [Next month Greg Clark MP - chairman of the welfare reform subgroup of Iain Duncan Smith's social justice policy group - will be writing three articles for ConservativeHome on what he is learning]. 

The situation in Britain could hardly be more different.  Many of Britain's welfare ills were listed by Sue Reid in a depressing article for last week's Daily Mail.  New Labour, 'Nixon-in-China'-style, had a great opportunity to transform welfare in 1997.  It had a huge parliamentary majority, the goodwill of the British people and an economic inheritance that could have paid for serious welfare reform.  Tony Blair's instincts - as has often been the case - were good and he appointed Frank Field as Minister for Welfare Reform.  But it all came to nothing.  Gordon Brown roadblocked Field's reforms and Labour rebellions (as yesterday's The Business reminded us) scuppered the promise of a 'hand-up, not a handout'.

Because of New Labour's weakness many more Britons lead lives that are not as free and rewarding as their American counterparts.  Resources that could be targeted on Britain's most vulnerable people - the very old, the very sick and the very young - are instead being squandered.  And Britain's economy is ill-prepared for the ever more intense competition from the east.

IDS says Brown's policies are not helping the most excluded

Asked on Monday's World Tonight what modern compassionate conservatism was defined by, Shadow Health Secretary Andrew Lansley suggested that it was about tackling growing inequality of life expectancy and ensuring wealthy Britain met its responsibilities to excluded Britain.

Today's Scotsman frontpages evidence that that growing inequality is horrifyingly real.  It finds parts of Scotland where male life expectancy is lower than in Bosnia, Lebanon, the Gaza Strip, Iran and North Korea:

"Today, The Scotsman reveals the true extent of inequality across Scotland, in a devastating study showing the country's wealthiest suburb has a life expectancy of 87.7 years, while a boy born in the poorest area of Glasgow can expect to die at 54. A child born in Calton, in the East End of Glasgow, is three times as likely to suffer heart disease, four times as likely to be hospitalised and ten times as likely to grow up in a workless household than a child in the city's prosperous western suburbs."

Iain Duncan Smith, chairman of the Conservative Party's new social justice policy group, said that Gordon Brown's economic policies had failed to bring the poorest Britons into the mainstream:

"Gordon Brown has chased the poor with money, but this just takes people to a higher level of dependency that it is difficult to break out of.  You may as well hang a sign on some of these places, saying 'abandon hope all ye who enter'. In Easterhouse, we saw kids who had to get themselves to school and out of bed because their parents were laid out by drugs. This cannot be cured by money."

Fraser Nelson, author of the Scotsman article, has previously talked about Scotland's "decommissioned" people.  People who the state has decided are too difficult to integrate into mainstream society.  The decommissioned don't just lack marketable skills but may also often struggle with mental health problems, low self-esteem or a history of addiction.  David Cameron's emphasis on social entrepreneurship is a recognition that the risk-averse and bureaucratic state lacks the ingenuity to reach these most excluded of people.

Old Europe often likes to look down on the USA and the way mainstream America has separated itself from the underclass by putting them in prison or housing them in ghettoes (see here).  This Scotsman article and France's long summer nights of countrywide urban riots suggest that all "advanced" western nations have a big problem.