Neil O'Brien: It's like the Thatcher revolution never happened

Neil O'Brien is Director of Policy Exchange.

Welcome back.  I’m afraid you’ve arrived at rather a critical moment.

Angela Eagle delighted the Fabian Society the other day with a speech declaring that “It is end of the Thatcher-Reagan era and it has come not a moment too soon.”

Her speech was a sign of the times, and in one sense she is right.  It’s certainly like the Thatcher revolution never happened.  According to the European Commission, UK public spending is heading for 48% of GDP in 2010. That puts us above the European average for the first time in a generation, and with a bigger state than when Thatcher started in 1979.

There are now roughly the same number of civil servants (about 480,000) as there were in 1979.  The Government have nationalised a major chunk of the economy and are mulling a series of industrial bail-outs, for example for the car industry.

True, the labour market is no longer crushed by trade union power, but European labour market regulation (particularly the working time directive and temps directive) have undermined our employment-friendly labour market, and are causing chaos in the NHS.

All the effort invested in turning around the British economy is going up in smoke.

Right now the focus is on getting credit flowing again.  But in the longer term, fixing the supply side of our economy is going to be just as important.  That’s your new department, and it’s in a mess.

Energy: Britain’s energy policy is a disaster area.  We have some of the most costly subsidies for renewable energy in the world.  Manufacturing jobs are being lost because we have such expensive energy (for example 500 recent aluminium job losses in Anglesey).  We are also facing blackouts as our ageing power plants are shut down early by the Large Combustion Plant Directive.  And we are extremely vulnerable to any disruption of our gas supply because we have so little storage.  Britain has 14 days worth of gas reserves, while Germany has 77 days worth and France 87.

Business Regulation: It would be unfair to say that the “better regulation” agenda has made no progress.  In fact it has gone backwards.  According to the British Chambers of Commerce, the cost of new regulations introduced since 1998 alone is £66 billion.  While this avalanche of paperwork has been hugely costly to British business, it hasn’t stopped a catastrophic financial crisis.

Regional Development: The nine English Regional Development agencies spend £2.2 billion a year.  But is this money well spent?  Well, a couple of years ago Yorkshire Forward paid a team of high-concept architects a million pounds to “re-imagine Barnsley as a Tuscan hill village.”  Much as I love Barnsley, it is not a Tuscan hill village - and that money could have been spent on something useful. Too much RDA spending is like this.

Infrastructure: Unlike Australia, Britain doesn’t have a joined-up ministry for infrastructure, so you will have to work with an alphabet soup of other organisations, including the DFT, the DEC, local authorities and the RDAs (if you don’t abolish them).  This helps to explain why we in Britain have found it so difficult to make joined-up decisions about infrastructure.  For example, whether high speed rail makes environmental sense depends on whether we are using coal or nuclear to generate the electricity that powers the trains. Likewise, the level of future demand for transport will depend on whether we can improve our woeful performance on broadband.  Until we have a properly coordinated approach we are likely to suffer with creaking, but very expensive infrastructure.  No wonder poor old Lord Mandelson has taken to banging his head on the table...