Kwasi Kwarteng MP: Ideas from the Free Enterprise Group to cut the size of the state

Kwasi Kwarteng is the MP for Spelthorne

Earlier this week the Free Enterprise Group, a group of largely new Tory MPs, along with the IEA hosted a "Growth Forum".  It was a short affair which lasted little more than two and a half hours, but there was an energy - an excitement even - which was palpable to everybody.

People often wonder what the point is of endless meetings and forums. I thought this week's event was an excellent example of how effective this sort of thing can be. Journalists, politicians, think tank people and academics all came together to articulate ways in which the British economy can prosper.

The inspiration behind the Free Enterprise Group is the enormous expansion of the state which occurred during Labour’s years of government. In 1997 government spending was about 37% of GDP. Today that figure is 49.4%, an increase of almost a third.  Whereas the budget was balanced at £315bn in 1997, last year spending reached £710bn. Our tax receipts were only about £590bn, hence the large deficit.

A dramatic increase in government spending has naturally led to a Britain in which people look to the government to provide the answers.  The reach of the state, exactly as Gordon Brown planned, now extends into every area of British life. We have more regulations, a much higher tax burden and less innovative drive.

It was against this background that the Free Enterprise Group was launched. We felt it was important to fight against this creeping tide of statism.  The full extent of Labour’s mismanagement can also be seen in the immense complexity of the tax system, and the reluctance of our companies to hire younger workers, often on account of the enormous burden of regulation. 

The Growth Forum itself was split into four panels, each considering one aspect of our national economy. The first was concerned with infrastructure. Ideas which were mooted included wider application of motorway tolls, like the M6, and more specifically the tolling of the five most commonly used motorways. This would raise £1.1bn with which we could cut fuel duty appreciably. This idea may be controversial, but it does attempt to introduce a wider degree of market pricing into road usage.

The second panel addressed problems of over-regulation in employment and declining standards in schools. Ideas from this panel related to the nature of small business regulation and exempting them from some of the more onerous burdens of employment law.

The third discussed spending and taxation. We were lucky enough to have Andrew Tyrie MP, the Chairman of the Treasury Select Committee, suggesting that the Government should try and bring public spending down to 40% of GDP. Others naturally proposed a lower proportion. David Ruffley MP suggested abolishing the Business Department, and this proposal grabbed the most headlines.

The fourth panel discussed improvements in public sector productivity. Thought-provoking ideas in this section included allowing profit-making firms into the free school system, in order to drive innovation.

There was certainly no shortage of bold ideas. Practically-minded people sometimes think this is just a lot of hot air, but, in reality, it is debate and ideas that are the critical factor in shaping the attitudes of the wider public.  New Labour understood this better than anybody. They, after all, said that spending was “investment” in the mid 1990s. This was a calculated move to beguile the public into thinking they had moved on from traditional Labour policies.  

No one expects these discussions to affect the mood in an instant. Public perceptions are shaped over many years. But there is no doubt that debates, forums, op-ed pieces, over a period of months and years, can shift opinion. We set up the Free Enterprise Group to make sure these arguments in favour of freer markets and individual initiative are heard. For too long the centre of gravity has shifted to the left, simply because the other side failed to make its case. The media didn’t want to know, but the fault also lies with those of us who had these views.

At the zenith of New Labour’s power we often lacked the confidence to make obvious arguments.  The result of this period is the situation which I have described, where there remains a presumption that state intervention and more regulations will provide the answer to every problem.  The Forum, I hope, will only be the beginning of a process of engaging with the media and the wider public. We cannot afford ever to stop making these arguments loudly and clearly.